Bob -
mises.org
"...It may happen one day that technology will discover a method of enlarging the supply of gold at such a low cost that gold will become useless for the monetary service. Then people will have to [p. 476] replace the gold standard by another standard. It is futile to bother today about the way in which this problem will be solved. We do not know anything about the conditions under which the decision will have to be made..."
Is it possible that some of the current weakness in gold may be the result of more modest advances in the economics of recovery methods?
Alternately, was there a large increase in gold mining investments around the time that gold peaked?
For example, if I decide to mine gold going forward, I need to consider the gold price, and the costs of rights, exploration, mining, etc. If the net result is a sufficient risk adjusted return on invested capital, I will presumably proceed. Assume that the go decision for a new mine requires a gold price of $600US/oz. However, if there exist the remnants of past mining failures available for pennies on the dollar, the sunk costs in rights, exploration and mining startup may not enter into my decision, and a gold price of say $200US/oz. may be sufficient to obtain a satisfactory return on current and forward investment.
Does a reasonable percentage of current mining output come from mines that have significant historical amounts of past lost sunk costs as previous owners have gone into bankruptcy or liquidated their investments at fire sale levels?
TIA, Don |
