Good post Chuk. You would think that the cost base would support price, but recent experience in the coal sector (last few years) has shown that this doesn't happen. If supply exceeds demand then the price just keeps dropping, cutting into the cost base. Some suppliers drop out, but most try and tough it out by cutting costs. Most Australian coal miners have reduced costs by around 25-35% in the last few years, and probably more than half are still not making any money. Supply is stubborn, and we should expect it to be this way in gold.
Those that will do better than others in the near term will be those that hedged gold sales at the recent peaks in price in US$/oz, but did not hedge the AUD/USD.
I am bearish on gold. Global interest rate markets are starting to awaken, QE in the US is winding down. Once the sniff of rising rates in the US gets a hold (still a bit iffy), a year or two ahead of expectations of a rise, then the USD should strengthen as investors take money out of the gold safe haven and buy USD to invest in the US.
In the absence of policy change of central banks, the gold price should trend down over the next few years.
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