Gold miners’ costs are mostly higher than current spot prices, increasing the likelihood of writedowns next year, according to Nick Holland, chief executive officer of Gold Fields Ltd. (GFI)
Across the industry, costs are about $1,300 an ounce including debt repayments, Holland said by phone from Johannesburg today, citing analysts’ research. Gold dropped 0.1 percent to $1,182 an ounce, bringing the decline since the beginning of 2013 to 29 percent.
“The industry by and large is under water,” Holland said. “I would expect further writedowns. Production I think will be curtailed but it will take some time to filter through the system.”
money illusion sounds like something a prestidigitator performs by pulling $100 bills from a hat shown to be empty moments before. In fact, money illusion is a longstanding concept in economics that has enormous significance for you if you’re a saver, investor or entrepreneur.
Money illusion is a trick, but it is not one performed on stage. It is a ruse performed by central banks that can distort the economy and destroy your wealth.
The money illusion is a tendency of individuals to confuse real and nominal prices. It boils down to the fact that people ignore inflation when deciding if they are better off. Examples are everywhere.
Gold dropped to new lows of $1,130 per ounce last week. This is surprising because it doesn’t square with the fundamentals. China and India continue to exert strong demand on gold, and interest in bullion coins remains high.
I explained in my October article in The Casey Report that the Comex futures market structure allows a few big banks to supply gold to keep its price contained. I call the gold futures market the “paper gold” market because very little gold actually changes hands. $360 billion of paper gold is traded per month, but only $279 million of physical gold is delivered. That’s a 1,000-to-1 ratio.
“True capitulation involves extremely high volume and sharp declines. It is usually indicated by panic selling. The word is a derived from a military term which means to surrender.”--Investopedia
It appears the gold market, despite the occasional good day, has entered a phase of true capitulation. Gold has fallen 40% since its $1,921 high in September 2011. GDX, the gold miners’ ETF, is down a numbing 78%. Many gold stocks are now selling at their 2008 lows, with some back at their 2001 lows (and major miner Barrick Gold is now at its 1992 price).
The cheapest gold in four years is proving irresistible for shoppers in China and India, where rebounding demand may signal an end to the longest price slump in more than a decade.
Purchases in Asia will help support prices that are headed for the first two-year decline since 2000, Standard Chartered Plc said. While surging equities and tame inflation have eroded gold’s appeal as a hedge, sending bullion tumbling to $1,132.16 an ounce [yesterday], prices are nearing the lows forecast by banks from Citigroup Inc. to Goldman Sachs Group Inc.
Initially, probably so. But it won’t stay there. One reason is because the Fed and other central bankers won’t sit idly by—they’ll print even more money, and will keep doing so until they get the inflation they want.
But it isn’t just inflation vs. deflation; it’s crisis. And crises usually bring fear. Look how gold has responded whenever fear—as measured by the VIX—has been high and the broader stock market fell.
Gold and silver logged sharp losses on Friday, for the week, and in October as both metals touched lows not seen since 2010. Conversely, demand for United States Mint gold and silver coins soared for the month. Gold coin sales were the best since January 2014 and silver coin sales the highest since January 2013.
Gold for December delivery fell $27, or 2.3%, to settle at$1,171.60 an ounce on the Comex division of the New York Mercantile Exchange.Prices reached as low as $1,160.50, the weakest point since July 2010 according to Bloomberg News.
Precious metals cratered, hit by a double-whammy of the rather hawkish Fed policy statement, coupled with a stronger-than-expected U.S. GDP report," Edward Meir, an analyst at INTL FCStone Inc., wrote in a note according to Bloomberg. "Gold is again confronting the specter of a stronger dollar, rising equity prices and tame inflation, a trifecta that does not bode well for price prospects going into 2015.