Fundamentals can change...

cohodk

http://www.bloomberg.com/news/articles/2015-02-12/gold-demand-declines-as-china-loses-biggest-buyer-spot-to-india


...and prices usually react well before stories like the above are printed in the media. The markets are not stupid and know a lot more than we as individuals do.



Mine production rose 2 percent to a record 3,114.4 tons.

So much for the hype that mines will be forced to close and will not continue to "print" gold (money) .

roadrunner

<< <i>Mine production rose 2 percent to a record 3,114.4 tons.

So much for the hype that mines will be forced to close and will not continue to "print" gold (money) . >>



The increases in production being seen now are from mines that were planned/constructed during gold's boom and coming on line the past 2 years. A sizable number of large projects for each of the big gold miners have been put on hold the past 1-2 years or walked away from (Newmont, Barrick, Kinross, Goldcorp, etc.). Mine production is part of the equation....how about recycled gold which has been declining for years. From GFMS: Total 2014 annual supply was virtually unmoved at 4,278.2t. Growth in mine supply was balanced by a decline in recycling volumes to a seven-year low. . There's more to it than just mine supply. If it costs you $1300+ to mine gold at a specific mine vs. a market gold price of $1200, there's the potential for that mine to be placed on "care and maintenance."

China's output rose sharply to +6%. But, all that gold stays in China. Other key gold producing nations see production fall. Mines are being forced to close and new mines on the drawing board have shrunk considerably. With nations like Peru, Columbia, Venezuela either breaking mining deals with corporations or raising tax rates, projects are being abandoned. It should only get worse as govt's look for more "free" money in the next 5 years.

But large falls came in "established" producer countries according to GFMS data, with US output down 12% on 2013, Peru and Chile dropping 10% each, and former world No.1 South Africa losing another 7% of its annual gold output......But "looking forward, the growth in supply from such projects continues to diminish and is likely to cap out in 2015 as the supply pipeline thins."

Gold miner spending on new exploration has fallen sharply as prices dropped 40% from the 2011 peak. Producer companies have also been "wrestling with cost pressures," says the market-development organization, with tighter spending now leading to a "dearth of new projects."

Some of the largest mining projects in the world are no longer being developed (Pebble Project, Donlin Creek project, Minas Conga mine, Pascua Lama mine, El Morro mine, Kinross not expanding Tasiast and walking away from Fruta Del Norte). Hundreds of $Billions of gold production at stake here. Just the Pebble Project alone is worth $200-$300B. The same rise in gold production was seen in 1980-1985 as projects from the 1970's came into full production long after gold peaked. The lack of new projects in the 1980's 1990's led to a low in gold production into 2000. It still can be said that whether new mine supply is 2800, 3000, or 3200 tonnes, that's still a drop in the bucket vs above ground supplies at 170,000 tonnes.

2014's changing gold output from individual mines reflected the broader world picture, GFMS goes on, with "more mature properties generally" performing worse. Output losses were recorded at "some of the world's largest mature assets," it goes on, citing the Cortez site in Nevada operated by world No.1 miner Barrick (NYSE:ABX), the neighboring complex owned by No.2 Newmont (NYSE:NEM), the giant Yanacocha project jointly operated by Newmont and Buenaventura (SWX:BVN) in northern Peru, plus some of the biggest sites in South Africa.

Gold demand from India could change drastically if India removes/cuts import duties/restrictions this month. It would seem logical that the new govt being more business friendly will reduce import duties. This could be a game changer for the Indian gold market in 2015/2016. Those restrictions are basically the reason demand has been curtailed. It's interesting how GFMS/WGC report on world gold demand but have no clue how much gold the Chinese central bank has been being since 2009.

cohodk

there's the potential for that mine to be placed on "care and maintenance.

Agreed. Thats just more potential gold to hit the market later.

Growth in mine supply was balanced by a decline in recycling volumes to a seven-year low

Probably. At $1200 people will hold onto grandma heirloom knowing it was 1900 just a few years ago. Also, with a better economy the need to recycle is greatly reduced.

Gold demand from India could change drastically if India (n's) start to make more money and hence has more disposable income. The need to eat still overshadows the need for adornment.


Point was, that all the so-called fundamentals can change which will result in changes in price. This concept was lost on many in 2011.

OPA

<< <i>Mine production rose 2 percent to a record 3,114.4 tons. >>



Thanks to Todd Hoffman and crew along with Parker Schnabel on "Gold Rush"