Finally, someone who agrees with me <grin>
If gold supply did not drop when prices dropped,
then why would anyone expect it to drop now with
prices $50 higher and predicted to go even higher ?
'Gold supply won't dry up soon'
London - Investors in gold who are counting on a sharp fall in mined bullion supplies to raise prices may be disillusioned, metals analyst Kamal Naqvi said on Tuesday.
Several industry studies have forecast a substantial decline in gold mine production over the coming decade, fuelling hopes that prices would reach further heights after this year's rally, which was based on safe-haven investment.
But Naqvi, of Macquarie Research, said the profit margin for miners on gold was attractive enough compared with the margin on other metals to ensure that gold extraction would not drop drastically.
"Given current gold prices above $300 an ounce, an average cash margin of $50 an ounce or 20 percent is attractive compared with other mine production," he said in a report.
One of the bullish arguments for gold is that as exploration for new mines declined during the long downturn in prices, mined gold supplies will fall in coming years, helping the price rally to continue.
Toronto-based mining investment banking and research firm Beacon Group Advisors has predicted that global gold output could plummet by nearly a third by 2010 unless higher prices motivate miners to start exploiting as yet untapped deposits.
Industry consultants Brook Hunt see gold production falling by nearly 12% from 2001 levels by 2006.
But Naqvi said such forecasts could prove exaggerated as it takes years for miners to commit irrevocably to new projects.
"The reality is that most long-term projections of mine output for metals suggest a massive reduction in total production," he wrote.
"However, as these years draw nearer then actual production tends to be considerably larger."
He did agree that even with all possible projects factored in, miners would still face challenges in maintaining their current levels of production over the next few years.
But he said hopes of an imminent and massive decline in gold mine production to boost prices would be dashed.
REF: news24.com |
