Twice the Gold. Half the Price? I Have My Concerns.
paparazzi
Posts: 12
Pap's is asking. Pap wants to know, nay, needs to know. If suddenly a gold mine was discovered and the amount of gold on our crusty little planet doubled would the price drop from thirteen hundred an ounce to $650? I tooled around and performed some serious googling on the intranets and discovered the volume of yellow medal would fill up two olympic sized cement ponds. With four pools filled after the above said discovery, is each ounce of the precious nectar then worth half the value it is today?
Not a trick question folks. Pap's has been wrestling with this dilemna and needs to know. To the good folks and brain-trust ne'er-do-wells of these here forums, a tip of the cap and a heartfelt thanks to you.
Not a trick question folks. Pap's has been wrestling with this dilemna and needs to know. To the good folks and brain-trust ne'er-do-wells of these here forums, a tip of the cap and a heartfelt thanks to you.
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Comments
Fellas, leave the tight pants to the ladies. If I can count the coins in your pockets you better use them to call a tailor. Stay thirsty my friends......
<< <i>Since all of the above ground gold has taken over 5000 years to accumulate, it's hard to imagine a scenario that would double that amount in a short time. >>
Oh Ye of little faith.
"All things are possible to those who have faith and believe." My mama used to quote from the good book before bedtime each night, right after Mchale's Navy. This was proceeding the weeks Kennedy had been shot and all was not right with the world.
And son, I found 20c under a seat cushion just earlier this afternoon so pap's knows there is more gold yet to be discovered over yonder and in them there hills.
<< <i>I think someone created a new ALT...UGGHH, yet another multiple profiler on the loose.
Fred, Las Vegas, NV
<< <i>
<< <i>I think someone created a new ALT...UGGHH, yet another multiple profiler on the loose.
likewise .... but a BongoBongo, he or she is not.
Loves me some shiny!
Major gold finds (ie 10 MILL ounces or more proven and probable or 300 tons) have dropped off the cliff the last decade or two. What was once commonplace 40-150 yrs ago, is now a rarity. Much of the easy gold has been identified and mined over the past several hundred yrs. Even with improvements in geology knowledge, mining techniques, and sophisticated equipment the battle is being lost. South Africa was the center of gold mining 40 yrs ago, today then are in 4th place among mining nations with output down some 60%. Miners are now digging miles underground and searching high in the mountains in harsh environments to find new sources. Couple that with ever increasing mining costs, much riskier political jurisdictions, difficulty in getting permits in a brave new green world, higher taxes and royalties, banks not as willing to lend, etc. and you don't have a glowing recipe to double current known gold inventories in the near future. Yeah, it "could" happen, but so could everyone on earth becoming superhuman as a red sun comes out of nowhere to enter our solar system. If that were to occur then every ounce of gold on earth (and in the galaxy) could be mined by individuals using their super powers. Gold would lose much of its value, as would most every other metal or material currently considered rare. While it did take 5,000 yrs to mine all the gold to date, the vast majority of that came in the past few hundred years during the industrial age. Gold prices have quintupled since 2001 yet overall gold ounces produced has dropped. Obviously large price increases aren't yet driving a flurry of exploration projects. I read on gold report that stated that it now takes 3X the ore mined to get the same amount of net gold as in decades past. That means ever increasing costs as well as "easily" mined gold being a thing of the past. Those 10+ gram/ton deposits of gold ore are now 0.5-3.0 grams/ton.
Maybe there is enough gold on earth to double or quadruple current supplies. The hard part is building the infrastructure to go get it. If the past 10 yrs is any indication, I wouldn't bet on it. The biggest gold projects recently discovered (such as NovaGold's Donlin Creek project) are running on the order of 30+ MILL ounces or 1,000+ tons of gold. You're going to need 5,000 projects like that to double up the gold supply....or one humongous strike 5,000 times anything recently discovered...which is approx the size of Texas having a uniformly high gold ore concentration. The expected mine life of Donlin Creek, assuming it gets permitted and constructed, is 25 years. Considering there are only a few dozen large scale miners in the world today how is the industry going to upscale itself by 5,000 times in a short period of time to make a difference this decade? There are gold strikes happening all the time showing great potential but on a limited scale (several square miles). It takes a huge amount of time to drill cores to map a deposit. It's not likely a Texas-sized deposit of 250,000 sq miles would be known from the outset. Gold might be found in Amarillo tomorrow, but it could take decades or centuries to fully map the size of a 150,000 ton deposit. And if the company that had such a deposit was smart they would not let the world know of the full scope but slowly work the deposit as they become billionaires. That's how the diamond trade does it (large supply available but only limited amounts are delivered into the market). Now imagine "buying" the mineral and property rights to Texas on the cheap (or a nation of quivalent size) and then pulling the permits to be able to mine the entire state. Certainly 5,000 separate projects makes much more sense but also means 5,000 times the initial exploration work and negotiating to get a deal done.
I dunno, but if someone accidently or deliberately burned 1/2 of all the paper US Dollars in the world, would the price of Gold double?
The price of gold would theoretically halve but it would have effectively have the same effect as doubling the supply of gold. Unfortunately circulating paper money is not the only thing that affects the gold price. Anything that substitutes or is thought to substitute as money (ie credit, debt, derivatives) also affects the gold price. Paper money is actually quite "rare" compared to all the debt and credit money. There's only a few trillion dollars of paper money circulating around the world. And it continues to have value as long as people think it does. The PTB were smart to shift to electronic debt money long ago so as not to give the impression of there being too much money around. And electronic debt money is far easier to track and tax. A $1 FRN has the same value of a $1 keystroked entry. Yet the latter is 15-100X more common. Still, the keystroked money variant dilutes the hand-held FRN version. Gold has no such keystroked ounces....except possibly in some of the gold ETF's, world trading exchanges, or in national bullion depositories.
Finding a quarter under your car's seat cushion is pretty common. Finding the state of Texas (or half of Alaska) under it.......not so common.
roadrunner
Perhaps since it's taken mankind 10,000 or so years to mine the first half you think you
could get the second half immediately? The time it would take to dig it out of the ground,
process it into ingots and put it into the market is soooooo long that the effect on the price
would most likely be negligible.
bob
Just don't break brain cells with thought like this.
oops: should have read TWQG and Roadrunners posts first!
<< <i>I think someone created a new ALT...UGGHH, yet another multiple profiler on the loose.