Glad To See Gold And Silver Prices Fall!

Gold doesn't cost 1k to make and it wont stopped being mined if the price falls below that. There wasnt a 20 year period of no mining from the late 80s to the late 2000s

Then I must have misheard this morning on CNBC. Of course I would assume the further you go in time the less easy to mine gold there would be. And inflation adjusted my understanding is gold is still below all-time highs.

In 2012, Newmont reported an all-in sustaining cash cost of $1,149 per ounce of gold produced.
In 2012, Barrick reported an all-in sustaining cash cost of $945 per ounce of gold produced, up from $745 per ounce in 2011. The figure in 2013 is expected to be around $1,000-1,100 per ounce. The profit figures are likely to be hit hard given that the company has assumed an average price of $1,700 per ounce for 2013.

I suggest you look at the 40 year history of gold and silver prices. Be sure to check out 1980. Gold was selling below $400 per ounce as recently as 10 years ago. I am skeptical that real production costs have tripled since then. More likely creative accounting to prop up the price.

Natural Gas is not a good analogy. Nobody buys Natural Gas as an inflation hedge or stacks it in a vault or makes jewelry out of it.

Gold production costs have risen because it is now economical to do so - miners can exploit worse areas for less gold and still turn a profit. When the price was historically low, gold was mostly mined in easier ways, for more yield per dollar. For instance, with current gold prices, it would be economical to plant mustard on abandoned mine sites and somehow get the gold out of the stalks (this is why everybody isn't doing it yet). If prices fell, we'd be back to panning in creeks, because operating your giant gold crop and mysterious extraction device would cost more than the gold output would be worth. So if prices went down (which they can, even without getting the express approval from the mines beforehand), a few low-yield mines might fold. If prices stay up to a reasonable degree, then it will become economical to mine asteroids and bring back truckloads of all the platinum group elements (I really hope we work this one out eventually).

I'm not saying you're wrong, but this doesn't make sense to me. If the mines thought prices were inflated and were going to fall substantially, wouldn't they want to mine all the 'easy' stuff as their production would be higher, costs would be lower, and the most money would be made? You think they save the easy stuff in case there is a drop for the sake of being operational during those times?

Thinking in the short term that would maximize your profit,, but that would also kill your companies future.

I do think the smart companies plan ahead for the future leaving the cheaper stuff for a price drop so they dont go years if not decades without revenue or just closing down. Some of the smaller ones may not care and just want to get in and out making as much money as possible. But the larger companies I would assume want to have a long term future and would leave the easy stuff for the price drop to remain profitable at least until theyve gotten all the harder stuff possible in their mines.

They may have to go through some easy stuff to get to the harder but if I was in charge I would leave that alone as much as possible until thats either all I have left or prices drop and it no longer makes sense to get the hard stuff.




Theres lots of reasons really. The obvious reason would be because thats what their books reflect and he doesn't want to get the IRS attention of coming clean.

But theres a much larger reason for PM companies to do so. When CEOs go on tv its basically a paid advertisement for their company. Having the public believe that gold will cost that much to mine would set a hard floor for its price. Paying 1400 an ounce isn't bad if the lowest it could go is 1000, some people stay away though because you could lose a lot more. The closer the price inches towards that 1000 spot the better buy people would think it is getting them to buy more which both protects his price margins and the need for his company keeping prices high.

Basically its in his best interest for people to think gold is as expensive as possible to mine. They want the higher prices because they can make more and get more gold. If you have 1000 dollar gold and 300 dollar gold at 1400 an ounce you can sell it all. At 600 an ounce you can only sell your 300 dollar gold making the 1000 dollar gold essentially worthless.

I am no gold bug. Seeing gold drop to around $1,200 wouldn't be a surprise to me but some of the predictions dropping to $800 seem much less likely to me now that you have 3 major Central Banks involved in stimulus. And since I am a 2014 U.S. economy bull I see industrial use supporting silver prices. It seems to me that a lot of times when everyone is looking for something it doesn't come when expected, remember when everyone was saying $2,000 gold was a certainty.