Wednesday, May 19, 2010

The Warnings Are Coming Out Again

The latest one has been webbed by Fortune magazine, and it reiterates the same price that old-style analysts have come up with. Ignoring investment demand, gold should be at $800/oz right now; that's what the traditional supply and demand analysis ends up with. The article concedes that investment demand could hold gold well above that level "indefinitely,"but suggests that global recovery will encourage enough gold holders to get rid of their gold to make investment demand ephemeral again.

So, as of now, there's little belief in a "New Era" for gold in the mainstream press. The author has a point when he notes than many incipient bubbles fail to get off the ground.

I note, though, that gold has not been at $800 since the troubles of 2008. The last time it settled at that price, absent a crisis, was at the end of 2007.


  1. I read the article and I found this quote from the article to be a real gem: "Because it costs miners about $480 on average to extract an ounce of gold, they plow ahead when prices are high, eventually leading to an oversupply situation."

    Really...Gold cost just $480/Oz to get out of the ground? Well, this is a fine cash cost, but as an all-in cost I'd like them to show me just one Tier I Gold Miner who can consistently produce at an All-In cost at less than twice that amount while increasing production (i.e., $960/Oz). Actually, there is one such Tier I miner who can produce Gold at less than $(60 Oz (AngloGold Ashanti), but their production has fallen for the past 4 years.

    Do any of these guys do their homework...or do they just come by this psycho-babble on their own? They are no better than the Gold Perma-Bulls who think that Gold will go up forever...."Just Because". Both groups are hooked into some sort of mystic religion of markets that will forever be anathema to me.

  2. "Reporters is reporters." They grab whatever figure is ready to go, which works out well when they're in familiar territory. Fact-checking means checking to see if they transcribed the figures right. That guy wasn't in familar turf, and it showed. He likely doesn't even know there's a difference between cash and all-in.

    Funny: the same guys know the difference between gross margin and net. No-one explained to him that cash costs are like costs of good sold, I guess.