Is the gold bull market over?

[captainawesome]

An anarcho-socialist going long on a capitalist relic? That's just too funny. Thanks, man, I needed a good chuckle. :lol:

How is gold a capitalist relic? It is the same as any other commodity.

 

[Ahlevah]

How is gold a capitalist relic? It is the same as any other commodity.

I was being sarcastic. Presumably, you don't need money in a socialist or communist utopia, and hard-money capitalists like gold as money. So for a guy who's professed anarcho-socialist positions to say he's long gold just struck my funny bone. I should have asked him if he was selling puts against the GLD.

 

[DA60]

From Marc Faber:

'“Technically, commodities look horrible…precious metals look bad. But tech factors would suggest we’re approaching at least an intermediate low. The commercials, which are essentially hedgers, people who produce gold and so continuously hedge, at the present time they have an extremely low short exposure, basically they’re accumulating gold.

“Whereas gold is close to $1,300 compared to say $700 in 2008, conditions in the mining industry are horrible. The exploration companies are running out of money and industry conditions are worse than they were in 2008. So I think that a lot of supply that potentially comes to the market through new exploration will simply not be there. In emerging economies sovereign funds, central banks and individuals will continue to accumulate physical gold.”'

Marc Faber: More S&P downside, commodities 'horrible'...except gold - The Tell - MarketWatch



Actually, for me personally, the fact that gold and silver took such dives after the Fed announcement is good news (though short term bad if you have gold/silver on 'margin').
It shows that people are still way overreacting to news in the precious metals markets...that bodes well for PM's when things turn bullish for them.

I mean all Bernanke said was that if things look better later this year and next year that the Fed might start to cut back.
Well duh...everyone knows that.
But almost every market around the world sold off on the news.
But with China slowing down, Europe still a mess (and seeming to get worse), emerging markets tapering off AND the U.S. economy being propped up by ultra low interest rates (which are steadily creeping up thanks to the bond market)/the Fed (which should be obvious from the massive reactions the markets take whenever the Fed even hints at the word 'taper')...I would not be betting much on a continued 'recovery'.
And even if the Fed ever slows down QE Infinity, as the markets fall and the house of cards US economy with it, they will start them again.

And let's not forget the bond market pushing up interest rates...how long can that go on without more Fed intervention?

IMO, this QE train is not slowing down...but will soon/eventually be speeding up.

It's going to be, as Marc Faber says, QE99 before it's over.


We will see.

 

[DA60]

Gold Drops Below Its Average Cash Cost

'As shown two months ago, the marginal cost of production of gold (90% percentile) in 2013 was estimated at $1300 including capex. Which means that as of a few days ago, gold is now trading well below not only the cash cost, but is rapidly approaching the marginal cash cost of $1104...

Which means that of the following mines (as we showed here) which make up the gold cost curve, one by one, starting on the right and going left, production is going to go dark, even without the recent demand by South African gold miner labor unions to have their wages doubled. Until eventually virtually no gold will be produced.

Gold Drops Below Its Average Cash Cost | Zero Hedge

 

[Khayembii Communique]

I was being sarcastic. Presumably, you don't need money in a socialist or communist utopia, and hard-money capitalists like gold as money. So for a guy who's professed anarcho-socialist positions to say he's long gold just struck my funny bone. I should have asked him if he was selling puts against the GLD.

I bought puts on GLD yesterday and will probably start buying the ETF in a couple months.

 

[Ahlevah]

I bought puts on GLD yesterday and will probably start buying the ETF in a couple months.

Some of the miners are starting to look interesting. They've really gotten drubbed, even compared to the metal. And, unlike the metal, they pay dividends. :mrgreen:

 

[austrianecon]

Gold has fallen below the price it actually takes to produce it. So gold supply might tighten up and you'll see a bounce back then..

 

[DA60]

Gold has fallen below the price it actually takes to produce it. So gold supply might tighten up and you'll see a bounce back then..

Eventually this is true.

But right now, people are mostly (it seems) running on emotions and not logic or fundamentals.

I still think this 'bear' market (inside an, IMO, long term bull market) has a ways to drop.

It should mean though that the long term price will not be much lower then it is today...even if gold speculation practically ended.

 

[imagep]

Gold has fallen below the price it actually takes to produce it. So gold supply might tighten up and you'll see a bounce back then..

It cost different amounts to produce gold from different sources. Even if gold fell back to $350/oz, some gold mines would still be economically viable. But yea, the lower the price goes, the less production there will be, and prices eventually stablize. The market is always moving toward equalibrium.

 

[rhinefire]

Jim Rogers bought gold on June 18.

“I bought more today [June 18, as a matter of fact. I bought a little bit, not much, over the last few days in case this was the bottom. I would not be surprised if there’s another chance to buy lower later on, but I’m buying and I own it. I haven’t sold any.”

Jim Rogers Blog: Gold: I Would Not Be Surprised If There's Another Chance To Buy Lower Later


Those of you that follow him know that he is a) big on gold, b) called for this correction before it happened and c) has been waiting for the price to drop enough before he would buy again.

I guess that time has arrived for him.

Interesting.

How's that working out for you?! No one is saying here what type of gold they are buying. Solid, mining, ETFmutual fiunds. There is a huge difference. Advise- stay the fk away from it. Give yourself a REASON why this is a good idea vesus otherstuff and don't say diversification. Gold is a loser and will hit 1,000.

 

[Khayembii Communique]

How's that working out for you?! No one is saying here what type of gold they are buying. Solid, mining, ETFmutual fiunds. There is a huge difference. Advise- stay the fk away from it. Give yourself a REASON why this is a good idea vesus otherstuff and don't say diversification. Gold is a loser and will hit 1,000.

I said GLD. And it's a loser so it's a good time to buy, and keep buying (on a long term basis, at least).

 

[DA60]

How's that working out for you?! No one is saying here what type of gold they are buying. Solid, mining, ETFmutual fiunds. There is a huge difference. Advise- stay the fk away from it. Give yourself a REASON why this is a good idea vesus otherstuff and don't say diversification. Gold is a loser and will hit 1,000.

From when I first bought it?

Extremely well.


And gold may indeed hit $1000. It may hit $800. Or even lower.

It is doing so because people think the economy is actually getting fundamentally better.

They are of course wrong as they will discover.

But the precious metal fundamentals (monetary instability/inflationary concerns) are much stronger then they were when it was $350/oz..


People who think the longterm gold bull market is over simply do not understand it.

Just like they didn't understand it back when it was $600/oz. back in 2007.


We will see.

 

[Kushinator]

Gold has fallen below the price it actually takes to produce it. So gold supply might tighten up and you'll see a bounce back then..

We hear the $1,250 number tossed around quite a bit. What has changed in the past 5 years that makes gold 200% or more expensive to mine?

 

[finebead]

I bought gold in 2003, just off its 23 year low reached in 2001. I sold out in late 2010 I think. It went much higher, but I made a pretty safe trade getting in after the gold bull market had proven itself and Bush was acting crazy cutting taxes twice and fighting 2 wars on credit card. Then there was Medicare part D passed in 2003 and started in 2005, 70 billion a year and no plan to pay for it. Then there was TARP in 08, stimulus in 09. I think gold is an emotional trade and when it falls apart, it falls pretty quick. Cycles in gold are long duration and I didn't want to be in when the cycle started down, so I got out early. There is a quote from Bernard Baruch, "I made my money by selling too soon".

I think gold is dead for a while.

Now, if inflation comes as a result of QE expanding the money supply and economic activity ratcheting up, then gold may take off again. When? That's the $64,000 question. Couple of years from now?

 

[Khayembii Communique]

Some of the miners are starting to look interesting. They've really gotten drubbed, even compared to the metal. And, unlike the metal, they pay dividends. :mrgreen:

I've been thinking about getting in on NCM for a while. In terms of mines it looks like one of the best bargains ATM.

We hear the $1,250 number tossed around quite a bit. What has changed in the past 5 years that makes gold 200% or more expensive to mine?

Exploration costs and increasing difficulty to maintain production levels have driven the cost of gold production up. Companies are sitting on pretty hefty reserves, but as those clear we'll probably see the fundamentals play out in higher prices, though it will probably be tough to tell because IMO gold is going to be pretty volatile over the next couple of years, especially when the Fed announces an increase in QE in the next couple of months if yields and the economic indicators don't fall in line (as they didn't in Q1).

 

[Kushinator]

Exploration costs and increasing difficulty to maintain production levels have driven the cost of gold production up. Companies are sitting on pretty hefty reserves, but as those clear we'll probably see the fundamentals play out in higher prices, though it will probably be tough to tell because IMO gold is going to be pretty volatile over the next couple of years, especially when the Fed announces an increase in QE in the next couple of months if yields and the economic indicators don't fall in line (as they didn't in Q1).

Gold Corp released their costs for 2012 and forecasts for 2013:

Working with the World Gold Council, the Company is adopting an "all-in sustaining cash cost" measure that the Company believes more fully defines the total costs associated with producing gold. All-in sustaining cash costs include by-product cash costs, sustaining capital, corporate general & administrative expenses and exploration expense. As the measure seeks to reflect the full cost of gold production from current operations, new project capital is not included in the calculation. A full reporting of cash activities will continue to be available in the Company's quarterly financial statements and Goldcorp will continue to report cash costs on a by-product and co-product basis in addition to all-in sustaining cash costs. For 2013, the Company estimates all-in sustaining cash costs of $1,000 to $1,100 per ounce compared to approximately $865 per ounce in 2012. Cash costs are forecast at between $525 to $575 per ounce on a by-product basis and between $700 to $750 per ounce on a co-product basis. Cash costs are expected to rise from 2012 levels primarily due to industry-wide cost inflation and the impacts of lower grades and by-product production at Peñasquito.

 

[Kushinator]

See page 41 for the non-GAAP per ounce all-in cash cost explanation.

http://www.goldcorp.com/files/Q1 2013 Combined MDA and FS (booklet)_v001_h83kap.pdf

 

[austrianecon]

We hear the $1,250 number tossed around quite a bit. What has changed in the past 5 years that makes gold 200% or more expensive to mine?

Wage increase, taxes, electricity costs and production costs. New rules pressure gold miners to come clean on costs | Reuters

Now there are some mines that produce it very cheaply and the are open mined pits. But the average cost is around $1,100 to $1,200 in my estimation.

 

[austrianecon]

It cost different amounts to produce gold from different sources. Even if gold fell back to $350/oz, some gold mines would still be economically viable. But yea, the lower the price goes, the less production there will be, and prices eventually stablize. The market is always moving toward equalibrium.

There only two mines that can mine gold at $350-$400 range that I know of.. one in US and one in Australia. Problem is they are open pit mines. Not the most eco-friendly and could be shut down if some get their way. But mining it is just one cost. You got to refine the gold to 99.95%, put it into bars and ship it as well. Those costs aren't part of the $350/oz calculation.

It's alot like the Oil industry. Getting Oil is only one part of the cost, refining it is another, marketing, then the taxes put on product (fuel) is another part.

 

[Kushinator]

I thought this was interesting.

What is the Cost of Mining Gold? | Infographic | Visual Capitalist

 

[DA60]

Wage increase, taxes, electricity costs and production costs. New rules pressure gold miners to come clean on costs | Reuters

Now there are some mines that produce it very cheaply and the are open mined pits. But the average cost is around $1,100 to $1,200 in my estimation.

More from this article:

'Average grades in 2002 of 2.8 grammes per tonne had tumbled to 1.2 g/t in 2011, meaning that for every tonne of rock moved, the amount of gold contained within has more than halved.

With most rich projects in traditional mining districts gone, miners were also pushed to expand capacity into lower-grade deposits and tougher geographies just to keep production flat, which was fine so long as gold prices kept rising.

But as gold prices tapered off, many new projects started to look very marginal.

That has left major gold miners in a bind, with their true cost of production hovering around $1,100 to $1,200 an ounce and sometimes higher - uncomfortably close to the spot price, which plunged to a 3-year low at $1,221 on Wednesday.'

This makes me feel even more strongly that - as I typed earlier - $1200 is a good starting point to start buying gold again.

It may go lower in the short term - judging by today it definitely will - but clearly in the long term, it should at the very least be a solid hedge buy...even forgetting the gold fundamentals of monetary instability/inflationary concerns (which are, IMO, very much still in play going forward).


An informative article.

Thanks for posting it.

 

[specklebang]

So it seems that gold has hit its intrinsic value and anything below this will probably turn right back into profit. Like real estate (I hope, I hope).

If it hits $1000, I'll buy some (more).

 

[DA60]

'GOLD : when you have this kind of forced liquidation, you are getting closer to a bottom

When asked if we’re seeing forced liquidation leading the smash down in gold this morning, Jim Rogers said, “We certainly are. There are a lot of leveraged players who are now being forced to sell. Usually when you have this kind of forced liquidation, you’re getting closer to a bottom, maybe not the final bottom, but certainly close to a bottom. I even bought a little bit [today].” - in bullmarketthinking


Jim Rogers started trading the stock market with $600 in 1968.In 1973 he formed the Quantum Fund with the legendary investor George Soros before retiring, a multi millionaire at the age of 37. Rogers and Soros helped steer the fund to a miraculous 4,200% return over the 10 year span of the fund while the S&P 500 returned just 47%.'

GOLD : when you have this kind of forced liquidation, you are getting closer to a bottom | JIM ROGERS BLOG

 

[washunut]

'GOLD : when you have this kind of forced liquidation, you are getting closer to a bottom

When asked if we’re seeing forced liquidation leading the smash down in gold this morning, Jim Rogers said, “We certainly are. There are a lot of leveraged players who are now being forced to sell. Usually when you have this kind of forced liquidation, you’re getting closer to a bottom, maybe not the final bottom, but certainly close to a bottom. I even bought a little bit [today].” - in bullmarketthinking


Jim Rogers started trading the stock market with $600 in 1968.In 1973 he formed the Quantum Fund with the legendary investor George Soros before retiring, a multi millionaire at the age of 37. Rogers and Soros helped steer the fund to a miraculous 4,200% return over the 10 year span of the fund while the S&P 500 returned just 47%.'

GOLD : when you have this kind of forced liquidation, you are getting closer to a bottom | JIM ROGERS BLOG

So are the gold miners a buy or short here?

 

[Ahlevah]

So are the gold miners a buy or short here?

Well, let's take one example--Canada's Barrick Gold. Less than two years ago folks were gaga-eyed over it when it was fifty-five bucks a share. Now that it's at $15 and erased $40 billion worth of market cap everyone hates it. That seems a little excessive, even for a company taking a $4.5-5.5 billion charge on a mining project in Latin America. I mean, if the idea is to buy low and sell high then I would think the odds are tilted more in your favor with the current price. I certainly wouldn't short it at that price.