Market Nuggets: Barclays: Production Costs Would Offer Support For Gold Around $1,300/Oz Tuesday April 16, 2013 8:01 AM
Support for gold can be expected around $1,300 an ounce, as a substantial amount of mine production may be at risk below this, says Barclays Capital. Last year, the average cost of production was $673 and the marginal cost (90th percentile) was $1,104. "Assuming sustaining capex at around $200/oz, this indicates cost support at around $1300/oz, based on last year's data; our global database encompasses 35% of global production," Barclays says. "Should prices dip below marginal cost, around 10% of production under our cost curve becomes cash-negative, representing an estimated 262 (metric) tons of cash-negative gold production globally."
Market Nuggets: TDS: 15% Of Gold Producers Underwater On All-In Cost Basis Tuesday April 16, 2013 8:00 AM
The huge two-day drop in gold prices the last couple of days could crimp supply if some output is now unprofitable, says TD Securities. "The fact that some 15% of gold producers would now be underwater on an all-in cost basis suggests that near-term and long-term supplies will wane, serving as support for long-term gold prices," TDS says. "Unlike in previous cycles, any possible producer hedging is unlikely to serve as damper on gold, as it will be very difficult to use traditional forward sales hedging given the credit environment in the commercial banking sector." |
