From the through in production (1979/80 or so) to today, production has more than doubled. But, that is not the only problem, technological innovations (such as heap leaching) have opened up resources that would otherwise be non economical, coupled with the realization by the banking community (CB's), that gold is no longer a monetary instrument, just another commodity, and thus the realization by the market that sooner or later, those reserves in the CB's vaults, are going to create an overhead supply to any serious advance. This, of course, as long as the world in general does not use the printing press in abandon to create real inflation. If inflation (and thus gold production costs) increases, there will be a process of rebalancing the equilibrium price of gold at a new level. I am not sure that inflation is around the corner. CRB is still behaving quite tamely, two years ago, it almost signaled a deflation, and frankly, I think that in many segments, overcapacity could keep deflationary pressures on.
Zeev |
