The gold price and production costs
I have not written about bullish on gold since April and October 2009, yet this is my favorite subject. For oil data is inaccessible (understatement), while for gold, if you know to look, you can have a lot of information on production, contents, methods... well almost everything (the official stocks of the states...).
Old Pavlovian reflex, multi centuries, it monitors the production of gold, there are, weighed, looking at buying, selling, etc.
1. The gold fever.
The systemic crisis of 2008 then led to a gold rush from 2009 to 2011. Once investors have contracted the virus of "gold fever" you can not do anything! The gold rose from 700 dollars to 1900 dollars per ounce. The problem is that gold has so dangerously far from its fundamentals, its production costs. Hence my discretion on the subject in recent years (I'm not here to be negative on commodities, I wait it out).
There was a second thing fishy, gold interest too many people. The newspapers made their first page on the price of gold, television reports, gold redemption shops flourished everywhere (you notice that they have disappeared). For investments, when everyone agrees, the precipice is never far away.
2. Production costs.
Today we ignore gold, the media is more of a trend "new era of cheap oil," a program! But above all, gold is approaching production costs of major mining companies.
Production costs! The kind of mundane details that nobody cares and who does not sell dreams.
What everyone notices is the rising price of gold, but what many do not know what is the increase in production costs. Since the low 2000 production costs of many gold mines have at least quadrupled (evil spirit, no it is not inflation!).
At the time of the 2008 crisis production costs "Total Production Cost" of the twelve most important gold producers, slightly more than a quarter of world output, were in a range between 300 and 500 dollars per ounce. In 2014, these costs of production "All-in costs sustaining cost" (change of norm) of these companies are included in a range from 779 to 1 053 dollars an ounce ...
The difference between the two standards, in short, is that the latter encompasses more things than the first. So you can consider, very roughly, that you can add 20-30% to the "total generation cost" of 2008 for the "All-in costs sustaining cost" of today.
3. Production costs = waterline.
The production costs of these large companies are somehow the waterline in the price of gold (the truth is more complex, but the image is still interesting). If the gold price falls below production costs, you will understand that this may only be temporary or production will stop. What makes the price of gold, as the cap that water thrown reverse.
Some will object, increased productivity and lower production costs!
Do you know how mines are to lower production costs now? They sell or close the least profitable mines, production costs go down a little and their production as well. There is little or no productivity. Something tells me that we should have an early decline in world gold production this year.
Note that I do not say that the decline in gold is over (I think not). It seems that the area of 1000 dollars is an important psychological support and it also corresponds, roughly, to the production costs of these large gold mines (their weighted average is 966 dollars per ounce). Gold is approaching production costs of industry mammoths, it no longer interests the crowds, so let's be annoying, patient and expect the sales!
Dr Thomas Chaize