Why won't Gold drop to $800?

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Have you been to a mine site and seen how many millions of pounds of dirt is moved to process one ounce of gold? Its not like the 49er's days where you simply walked into a stream and picked up a 7 ounce gold nugget. I am not a gold bug, but its a lot rarer than you make it out to be sir.

 

One might be surprised to learn that a large majority of the gold that is brought out of the ground is actually a by product of a copper or other type of mining.

Yes I have. And it was in Utah and a copper mine. One of the largest copper mines in the world. They indeed moved millions of pounds worth of dirt - mining copper, and in the process ended up with a good amount of gold in the process.

Not all gold is brought out of the ground as on the discovery or history channel (can't remember which) and the various gold shows they produce. I mean let's face it - Todd Hoffman and his crews are like the "Keystone Cops" of gold mining.

 

I am very aware how Copper mines are large primary sources of both silver and gold, and how lead-tin mines are large suppliers of silver. I referenced it in my ealier post to Mike about $800 gold costs considering the devaluation of other metals in the mining stream. The lower copper or tin goes, though, has to raise the price of the gold from the mine if proper allocation accounting is used. Conversely, high copper or tin prices would generally be bearish for PM since miners can continue to mine copper at $4 a pound even if gold went to $400 an ounce. Copper at $2 a pound, though, will not work if gold is $400, and the mine would shut down.

Some gold and silver come from primary mines, but much comes as byproducts. Platinum is different. A little come from other mines, but most I believe comes from primary PT/PA mines.

 

"About 15 percent of the gold produced in the United States has come from mining other metallic ores. Where base metals- -such as copper, lead, and zinc--are deposited, either in veins or as scattered mineral grains, minor amounts of gold are commonly deposited with them. Deposits of this type are mined for the predominant metals, but the gold is also recovered as a byproduct during processing of the ore. Most byproduct gold has come from porphyry deposits, which are so large that even though they contain only a small amount of gold per ton of ore, so much rock is mined that a substantial amount of gold is recovered. The largest single source of byproduct gold in the United States is the porphyry deposit at Bingham Canyon, Utah, which has produced about 18 million troy ounces of gold since 1906. "

United States alone - 15% ...

 

Because you are not buying food for an investment. You need to have food and are forced to pay the going rate. You do not need to buy PM's and you are able pick and choose when.

The price of a commodity can have large swings, both above and below the cost of production, but the price in the long run will tend to gravitate towards that cost basis. So when your purchase above production costs, your chances of a happy outcome decrease and when you purchase below they increase.

 

Sure, why not, with everything so beaten down, the odds should be on your side. Good luck with the calls

 

Yes, that too....

 

http://www.barrick.com/operations/

 

Great link and with fuel costs plummeting, my guess would be that cost per Oz will drop further in 2016

 

But even that link has their costs over $800, and they brag how they are greatly superior mines than most others. So is it out of line to assume high industry average might be pretty dang close to spot today?

 

Everyone talking bearish... $800/oz and $400/oz... actually makes me more bullish.

 

Public traded mining companies have to submit that among other info ( although you may have to work to find it) in their quarterly or yearly submissions to the US SEC gov. or to Canadian gov. agencies. , or abbreviated data at Yahoo finance such as this
http://finance.yahoo.com/news/goldcorp-achieves-record-quarterly-gold-120000158.html

Where each mine has a somewhat large variation in cost of production.

 

Cost of production means squat. It is stuffed full of pencil pushing costs of amortization, depreciation, depletion, R&D, overhead allocations and etc which are incurred whether a mine processes a yard of earth or not.

Once a mine is open profitability transforms primarily to a Wall Street issue.

 

Nice link but after clicking on a few of the mines it owns and operates, the average cost is over $800.00 as medoraman said. One of the mines has an average cost of over $1100.00 per ounce. Gold near the surface is cheaper to mine as compared to gold deeper in the earth. Just because one mining outfit can mine at a lower costs doesn't mean all mining companies can. With sustained lower gold prices, some mines will go broke and sell to other mining companies.

The costs of production must be kept as low as possible to keep operating. There is no difference between needed and wanting when compared to production costs. If you want and can't afford because all the money you have goes to what you need, you will find a way to do without certain needs. Grow your own food, or at least some of it. You will be cutting your costs.

Regardless of the production costs of gold, you will be losing money if you buy today. World forces are forcing the prices of everything down. Wait until a bottom forms, then buy. All world markets are in a correction that will not be the end of the world. There are in this correction because of printing money with nothing to back it up. Sooner or later, inflation will come with a roar.

 

If you want to make money predicting futures invest in the companies selling "information" about the future gold prices or any other commodities. You never can tell what will happen but people will always want answers to unanswerable questions.

 

PM is easy. Every year write down somewhere that PM will "explode" in the coming twelve months. Repeat "prediction" until it actually comes true one year, and spend the rest of your career doing the same thing, but pointing out the time you were right, and charge people money for your "valuable insights". A number of hacks have made a living doing this since the 70's.

Longnine, yes, I am sure there are 100 times more people doing the same with stocks. Just because I point out a weird market item in PM is not meaning I am not saying it happens in stocks or some other markets. I am simply saying it seems PM people on average seem to be a little more prone to believing these shysters.

 

When margin calls are made, PM's are often sold to raise cash to cover then. Physical metals can trade at prices completely detached from the "spot" price, as silver is doing as we speak.

Also, when wars break out, countries sometimes sell their gold to buy their weapons, thus keeping the price down. Just my humble two pice.

 

Not detached, just basis change. Basis always goes up when prices decrease until supply forces it back down. Negative basis happens when you sell and dealers expect it to continue falling. I have seen buy offers on junk silver $3-4 back of spot for "good" buyers.

 

Not just metal and stocks. Now it's predicting an apocalypse and providing storage food. I'm sure this topic has no end as something in the human nature wants to prepare and be in control.