is it really that bad?, page-23

I agree with sankhara on the USD gold price - neither the US nor the people the US owes money to want to see the USD being worth less than a 1000th of an ounce of gold.

Where there may be a silver lining is that unless we have a bumper reporting season indicating an end to the downturn we are likely to see commodities come under pressure - or at least not rise under the expectation of a major industrial recovery.

Safe haven dollar, deflation, risk aversion in currency markets, commodities not flying, potential for Ozzie interest rate cuts all equal pressure on the AUD.

If the AUD falls then SBM is a far more attractive scenario.

Assume gold at 900 USD per Oz and the dollar at 0.80 then we have an AUD gold price of $1125.

But if the AUD moves to 0.70 we have an AUD gold price of $1285

SBM seem to be forecasting 0.75 for the AUD which adds up to $1200 per Oz used in their model. We are at 0.7745 and falling at the moment so perhaps not unreasonable.

This is what happened last time SBM went for a run - nothing to do with exploration, recovery rates etc etc. It was simply the AUD was cheap against gold (which was high then) and they moved into a more profitable scenario.

They have stemmed some of the bleeding which will offset the drop in the USD gold price, but probably not enough to make people open their wallets. But a lower AUD combined with an expectation that it will stay low for a while would change the picture.

How much I don't know - these guys smell at the moment.