From Russia to South Africa to North America, the biggest producers saw profits turn to losses as prices plunged, forcing them to cut spending on mines in half over three years. While bullion output will probably reach a record in 2015, the increase will be the smallest in at least six years, before production drops 1 percent in 2016, according to Barclays Plc.
If mining is not profitable and sharp declines are projected to begin sometime within the next 24-36 months–not even the blink of an eye–wouldn’t it make sense to begin, now, acquiring as much as possible? I am not a dealer of any kind–bullion, coins or otherwise. If you aren’t turning every available “dollar” into gold or silver, right now, then I would ask, why not?
Bloomberg’s report is supported by Keith Barron, exploration geologist and mining entrepreneur, who, back in October 2014, was interviewed by Lars Schall, for Gold Switzerland. They’ve discussed, inter alia: the challenges for gold mining companies; the effects of a downward rigged gold price on Third World countries; the “inevitability” of a gold price at 5000 USD per ounce in the future; and Barron’s support for the Swiss gold initiative.
While this is an extensive interview, it is well worth your time:
Mines supplied 3,114 metric tons last year, an all-time high valued at about $127 billion, after companies stepped up investment to capitalize on prices that surged more than fivefold in the decade through 2011. While the appeal of gold as a financial asset means that supply doesn’t usually influence the metal’s value as much as economic or monetary policies — partly because every ounce ever mined still exists — demand is growing in China and India, the largest buyers.[Source]
Gold mining is not profitable, gold supply is shrinking while China and India are acquiring and mining all the gold available. China is now the largest gold mining country in the world with annual production running approximately 400 tons, and not a single ounce has left the country in several years. China is also one of the largest silver mining countries in the world and instead of supplying approximately 100 million ounces annually to the open market, China has been acquiring approximately 100 million ounces annually since 2011-2012. That represents a 200 million ounce swing in a 700 million ounce annual market!
Think these problems with mining and gold supplies are going to ease up? Well, not according to two of the largest gold mining operations in the world.
Barrick Gold Corp., the biggest producer, had a $2.9 billion net loss last year, the biggest since 2009, on lower prices and writedowns of mines in Chile and Zambia. AngloGold Ashanti Ltd. said in February that it will cut output by as much as 10 percent this year as it spends less and stops mining high- cost deposits. The New York-traded shares of both companies plunged by more than 70 percent since the end of 2011.
Rothschild stated “The time to buy is when there’s blood in the streets.” It appears there is blood beginning to flow. How much more blood-letting is necessary before people start to understand?
“Any contraction in mine supply will tend to tighten the physical market, which feeds through to price,” John Meyer, an analyst at London-based brokerage SP Angel Corporate Finance LLP, said by telephone on Thursday. “It is also a positive influence in a larger dynamic that influences investor sentiment towards gold.”
The current gold to silver ratio is 71.85!!! This is important because the natural gold to silver ratio, coming out of the ground, is 9!! That is a 9 fold difference in the current price. That means for every ounce of gold it takes 71.85 ounces of silver to equal the same price. If you were to purchase 72 ounces of silver today and that price ratio drops to 30 you could trade your silver for more than two ounces of gold, assuming the gold will be available, basically doubling your wealth.
“The big question is how fast supply will start falling,” Nic Brown, an analyst at Natixis, said in an interview from London on Wednesday. “We don’t think we are going to see sharp declines until at least 2017.”
So, Nick doesn’t THINK we are going to see sharp declines until at least 2017! Does that mean we could see declines beginning right now and as the next 24 months unfold the pace accelerates? That’s what it sounds like to me.
If we listen to Goldman Sachs peak gold is happening right now. With Goldman Sachs track record for “sheering muppets” this is a little suspect. We should listen due to the fact that it aligns with several other analysts reviewing the same metrics.
According to Metals Focus, by 2018, the industry may generate 100 tons less than four years earlier, the consultant said.