Gyroscopic Investing

The current 1.73% jump this morning in gold prices, I was wondering whether there exists a "floor" in the price of gold...  Ran across this excerpt:

In response to weaker bullion, gold miners are estimated to have slashed their all-in cost of producing an ounce of gold to an estimated $1,350 in the first half of 2014, according to data from Thomson Reuters' GFMS metals research team. That was down from $1,696 an ounce for full-year 2013.Sep 25, 2014...

At some point, one would think that gold miners will start shutting down and at least the supply will dwindle...

This might take the sting out of thinking about rebalancing into gold in the future...

I don't think mining cost is a floor per se, although it can certainly affect the price.  There is no reason the price can't go below mining cost if people just don't want the stuff

I guess relative scarcity is something that gold always has going for it. Below a certain price per ounce, the miners are losing money taking the stuff out of the ground (getting into territory that I don't know much about here). Anything that keeps the supply small would seem to bode well at least for long-term performance.

If I was a miner it wouldn't make sense to sell the gold with a loss. I would rather horde the gold until I could get a better price.
Of course I would have salaries and equipment to pay but there is always leverage.

Miners has no leverage. They are price takers. They add little to the stock of gold in circulation each year. And most of gold does not get destroyed.

Most of oil goes up in smoke, yet still oil producers cannot get their full cycle E&P costs back. They are price takers, too. On a full cycle basis, they are losing money, though each barrel produces marginal incone.

Yes I agree. The miners and the in fact costs don't influence the market. We had the situation that the gold price was below the production costs. But although everybody thought it must go up, it didn't the price was falling even though. Many mining operations were forced to intermit because gold mining was not profitable anymore and all they could do was waiting. The price trend of gold is not predictable and often the real economy does not reflect a natural cycle, more controlled than that. And that makes it complex, for all parties.

followme wrote: Yes I agree. The miners and the in fact costs don't influence the market. We had the situation that the gold price was below the production costs. But although everybody thought it must go up, it didn't the price was falling even though. Many mining operations were forced to intermit because gold mining was not profitable anymore and all they could do was waiting. The price trend of gold is not predictable and often the real economy does not reflect a natural cycle, more controlled than that. And that makes it complex, for all parties.

Seems like gold miners could easily get into the situation of frackers, in another world...

http://www.zerohedge.com/news/2015-04-2 ... e-pressure

Currently there is a huge difference between gold prices and the valuations that gold miners are getting. But I think, they will soon be getting the good leverage with change in the market scenario.

PureSoul wrote: Currently there is a huge difference between gold prices and the valuations that gold miners are getting. But I think, they will soon be getting the good leverage with change in the market scenario.

Miners have no leverage. They are price takers, not market makers. Rinse and repeat.

Yet another reason for me for the PP.  I have been burned too often by individual miner holdings and GDX/GDXJ to ever consider investing in them again directly.  I don't care how much of a bargain they may seem.

ochotona wrote:

PureSoul wrote: Currently there is a huge difference between gold prices and the valuations that gold miners are getting. But I think, they will soon be getting the good leverage with change in the market scenario.

Miners have no leverage. They are price takers, not market makers. Rinse and repeat.

I fully agree! The market "makers" are others ...