Bob: "Firms tend to do what they think is in their own best interest, not what benefits the industry"
Which is the fundamental problem. As you know, it was the fragmentation of the diamond industry and the dog eats dog attitude which, almost 100 years ago, prompted Oppenheimer, Joel, Barnato etc to make a cartel in order to stabilize prices. Surely, this is also the reason behind OPEC and other cartels.
And, as you also know with gold the situation is complicated by the CBs which are now net sellers unlike 50 years ago when they were net buyers. Hopefully, when these guys are done selling, mining supply and market demand will come into equilibrium and POG may be induced to rise. One hopes however, when that happens, that gold will not have been "debased" to the extent that it is no longer regarded as "precious".
In fact, whether the mines wish to act in concert or not, if they do not continue to propagate the myth that gold is "precious" then all of them will be out of business. It is the preservation of the myth on which the survival of the whole gold industry depends but, with CBs selling all the time, mines producing as hard as they can and selling forward as much as possible and POG falling continuously, it is becoming harder and harder to preserve.
Surely, the one single arbiter of whether something is truly precious is that its price keeps rising. The gold price, on the contrary, does not rise, even in paper money terms. In fact, for the past 20 years it has been falling compared to virtually everything. |
