What intrigues me about that chart is the surge in production even aftere gold began to fall 20-30% starting in 2012.
Not sure if the falloff after 2019 was initially Covid-related and there hasn't been a resumption of supply growth. Supply chain disruptions ? Higher input costs ? Re-focus on shareholder value, ala oil companies ?
Could be that the supply surge 2010-19 was from existing planned FIDs and the lack of new gold mines 5-10 years ago is now showing up in stagnating production.
@GoldFinger1969 said:
What intrigues me about that chart is the surge in production even aftere gold began to fall 20-30% starting in 2012.
lower prices fuel demand
"Interest rates, the price of money, are the most important market. And, perversely, they’re the market that’s most manipulated by the Fed." - Doug Casey
@derryb said: @GoldFinger1969 said:
What intrigues me about that chart is the surge in production even aftere gold began to fall 20-30% starting in >2012.
lower prices fuel demand
@derryb said: @GoldFinger1969 said:
What intrigues me about that chart is the surge in production even aftere gold began to fall 20-30% starting in >2012.
lower prices fuel demand
We're talking about supply...pay attention !!
your statement about surge in production compared it to prices. pay attention.
"Interest rates, the price of money, are the most important market. And, perversely, they’re the market that’s most manipulated by the Fed." - Doug Casey
@derryb said:
your statement about surge in production compared it to prices. pay attention.
Production surged as prices FELL -- not what you would expect. What happens is there is a long lead-time before production kicks-in. The FIDs were probably made 5-10 years earlier when prices WERE higher.
@derryb said:
your statement about surge in production compared it to prices. pay attention.
Production surged as prices FELL -- not what you would expect. What happens is there is a long lead-time before production kicks-in. The FIDs were probably made 5-10 years earlier when prices WERE higher.
like i said lower prices will fuel a surge in production because of a surge in demand. It's basic economics.
"Interest rates, the price of money, are the most important market. And, perversely, they’re the market that’s most manipulated by the Fed." - Doug Casey
@derryb said:
like i said lower prices will fuel a surge in production because of a surge in demand. It's basic economics.
No, you're confusing cause-and-effect. If there was a "surge in demand" -- prices wouldn't have collapsed. It's a delayed supply thing.
I think you've got it backwards. Falling prices created the surge in demand as buyers saw what they considered a bargain.
And then, production increased to meet that higher demand. Eventually equilibrium will set a new price and a new production number as the increase in demand drives prices higher and demand settles down.
"Interest rates, the price of money, are the most important market. And, perversely, they’re the market that’s most manipulated by the Fed." - Doug Casey
Goldminers, how would you compare the "richness" or ore content of existing mines today vs. 10 or 20 years ago ? What about 30 years ago ?
Almost all gold mines that are open pit style, have increased costs as they go deeper and add on "laybacks". Lots of energy required to climb out of those deep pits. To some degree the same is for underground depth. As far as "richness" gold grades do tend to be lower going forward, as every company tries to mine their most profitable ore first. This is a time value of money decision, as well as trying to get a better return on the initial capital invested.
Bottom line is that even though mines have several years of reserves and resources on the books, it gets much harder to make significant profits on them. More waste stripping, lower grades, higher country costs to keep a license to operate, environmental mitigation, etc. Yes, peak gold production is near.
Also do not underestimate platinum. Producers can't make money at these prices. Fuel cells and hybrid vehicles need platinum to reduce emissions. This is the second year of deficits and stockpiles are dwindling. At some point, it will get a boost.
But nothing compares with central banks buying gold now to avoid holding fiat currencies or government/corporate bonds which are much riskier these days than sometimes in the past. Like some blitz guy often says, buy and hold some physical gold with some of your savings. Stocks are due for a reality check.
South African production peaked in 1970. It's 1/3rd that level today. Your analysis is spot-on.
Saw someone saying that PGM's have been destocking and speculative selling (reversal of purchases) has killed them. The analyst was surprisingly bullish. I'm still wary because of declining auto demand and Russian dumping potential.
Silver continues to be touted because of solar, 2025 was mentioned as the Year Of Inflection. We'll see.....
Goldminers, those South African mines that are deep underground....they're unique, right ? Much richer in gold ore than today's close-to-the-surface mines that use leeching and chemicals ?
@GoldFinger1969 said:
Goldminers, those South African mines that are deep underground....they're unique, right ? Much richer in gold ore than today's close-to-the-surface mines that use leaching and chemicals ?
They are not completely unique. There are plenty of underground gold mines, and I have been in a bunch of them, but some in SA are very deep. It is very expensive to hoist things up and down that far and as you go deeper it gets hotter which requires very expensive refrigeration and ventilation units. Costs go way up as you go deep. It also takes a while to get from the surface to actual working areas, so manpower efficiency is lower in addition to the tough working conditions. The grades are usually higher to justify mining at depth, but profit margins stay low, so the grade is not the main issue, costs matter.
Deep underground can have rock temperatures over 150 degrees. A mine around 5,000 ft. deep will have air temperatures 70-90 degrees above the surface air temp. A silver mine in Idaho that I worked in was 7,000 feet deep. They are still mining there.
Comments
What intrigues me about that chart is the surge in production even aftere gold began to fall 20-30% starting in 2012.
Not sure if the falloff after 2019 was initially Covid-related and there hasn't been a resumption of supply growth. Supply chain disruptions ? Higher input costs ? Re-focus on shareholder value, ala oil companies ?
Could be that the supply surge 2010-19 was from existing planned FIDs and the lack of new gold mines 5-10 years ago is now showing up in stagnating production.
Have to hit that Jefferies initiation report !
lower prices fuel demand
"Interest rates, the price of money, are the most important market. And, perversely, they’re the market that’s most manipulated by the Fed." - Doug Casey
We're talking about supply...pay attention !!
your statement about surge in production compared it to prices. pay attention.
"Interest rates, the price of money, are the most important market. And, perversely, they’re the market that’s most manipulated by the Fed." - Doug Casey
Production surged as prices FELL -- not what you would expect. What happens is there is a long lead-time before production kicks-in. The FIDs were probably made 5-10 years earlier when prices WERE higher.
like i said lower prices will fuel a surge in production because of a surge in demand. It's basic economics.
"Interest rates, the price of money, are the most important market. And, perversely, they’re the market that’s most manipulated by the Fed." - Doug Casey
No, you're confusing cause-and-effect. If there was a "surge in demand" -- prices wouldn't have collapsed. It's a delayed supply thing.
I think you've got it backwards. Falling prices created the surge in demand as buyers saw what they considered a bargain.
And then, production increased to meet that higher demand. Eventually equilibrium will set a new price and a new production number as the increase in demand drives prices higher and demand settles down.
"Interest rates, the price of money, are the most important market. And, perversely, they’re the market that’s most manipulated by the Fed." - Doug Casey
Derry, check the chart.....supply was INCREASING as the price FELL.
Almost all gold mines that are open pit style, have increased costs as they go deeper and add on "laybacks". Lots of energy required to climb out of those deep pits. To some degree the same is for underground depth. As far as "richness" gold grades do tend to be lower going forward, as every company tries to mine their most profitable ore first. This is a time value of money decision, as well as trying to get a better return on the initial capital invested.
Bottom line is that even though mines have several years of reserves and resources on the books, it gets much harder to make significant profits on them. More waste stripping, lower grades, higher country costs to keep a license to operate, environmental mitigation, etc. Yes, peak gold production is near.
Also do not underestimate platinum. Producers can't make money at these prices. Fuel cells and hybrid vehicles need platinum to reduce emissions. This is the second year of deficits and stockpiles are dwindling. At some point, it will get a boost.
But nothing compares with central banks buying gold now to avoid holding fiat currencies or government/corporate bonds which are much riskier these days than sometimes in the past. Like some blitz guy often says, buy and hold some physical gold with some of your savings. Stocks are due for a reality check.
My US Mint Commemorative Medal Set
South African production peaked in 1970. It's 1/3rd that level today. Your analysis is spot-on.
Saw someone saying that PGM's have been destocking and speculative selling (reversal of purchases) has killed them. The analyst was surprisingly bullish. I'm still wary because of declining auto demand and Russian dumping potential.
Silver continues to be touted because of solar, 2025 was mentioned as the Year Of Inflection. We'll see.....
Goldminers, those South African mines that are deep underground....they're unique, right ? Much richer in gold ore than today's close-to-the-surface mines that use leeching and chemicals ?
Goldminers, the Up and Down Wall Street column in this week's BARRON'S was a plug for gold mining stocks.
I may write to Randall Forsyth, the author, with a few comments but in the past he's kind of blown me off, unlike the other BARRON'S/WSJ reporters.
This could reverse which would NOT be good for gold (or the stock market):
They are not completely unique. There are plenty of underground gold mines, and I have been in a bunch of them, but some in SA are very deep. It is very expensive to hoist things up and down that far and as you go deeper it gets hotter which requires very expensive refrigeration and ventilation units. Costs go way up as you go deep. It also takes a while to get from the surface to actual working areas, so manpower efficiency is lower in addition to the tough working conditions. The grades are usually higher to justify mining at depth, but profit margins stay low, so the grade is not the main issue, costs matter.
Deep underground can have rock temperatures over 150 degrees. A mine around 5,000 ft. deep will have air temperatures 70-90 degrees above the surface air temp. A silver mine in Idaho that I worked in was 7,000 feet deep. They are still mining there.
My US Mint Commemorative Medal Set
The electrical supply in SA is fairly unreliable and labor unrest further complicates the cost structure as well.
I knew it would happen.