Hi GermanPirat, Yes. It will be interesting to see what happens...

Hi GermanPirat,

Yes. It will be interesting to see what happens from here. I don't think anything good unfortunately. The GDXJ fell nearly 12% overnight Friday ahead of the Swiss Referendum and gold got smashed too.

This chart, from Grant Williams "Hmmm" is telling I believe and nothing new for those that have been reading his pieces for a while:



You're up against it when investing in gold and the miners, for sure.

Also thanks for the heads up re the dumping from the MSCI index. I had been watching the ASX300/ 200 but was not aware of that ... bugger.

I've read lots of people talking about gold finding a floor as it approaches the AISC for miners (at around these prices). However, if we look at POO as an analogue, it will be the cash cost levels that are important as miners won't cut production until they start running out of cash - all other non-cash items will affect the P&L but not the bank account, at least not in the short term.

I would like to think that the hammering BDR has taken, and the failure to bounce, is related to the trading aspects of being dumped from the index and the front running by the shorters more so than Dan's concerns about PB et al.

There are so many conflicting moving parts to the physical vs paper gold narrative it makes your head hurt:

- Mine supply c. 2.9kt p.a. insufficient to meet annual demand (ETF outflows making up balance for now, 880 t outflow in 2013)
- Large flows of physical gold from London via Switzerland to the East
- Large imports into China via HK and data from SGE showing demand much higher than WGC estimates
- Netherlands repatriating 122 t gold announced last week
- Germany [appears to have] abandoned its repatriation efforts after only 5 t delivered (of 300) in first year
- Russia continues to add to gold reserves - 150 t so far in 2014, double 2013
- Central Banks are publicly net buyers of gold since 2010 [WTF really knows what they do collectively]
- Indian demand +100 t per month over last two months
- India removed 20:80 rule for gold imports on Friday night
- Global mine grade has fallen to average of only 1.18 g/t (from c. 4.7 g/t in 1998)
- Global gold discoveries are falling and reserves not being replaced and undeveloped mines average only 0.89 g/t - which would make the average undeveloped gold deposit unlikely to be developed in this climate
- Global mine supply not materially increasing y-o-y and total supply (mine + recycling) has been falling since 2011 (4,499 t in 2011, 4,415 t in 2012, 4,340 t in 2013)
- This is less than demand in 2013 (consumers, 3,863 t, investment 1,293 t = 5,156 t)
- ECB representative indicating that ECB may start buying assets directly including gold
- Gold going up or stable in many currencies
- Low interest rates (negative in the Euro) present little opportunity cost for holding gold (and no counterparty risk)

[Check out http://www.visualcapitalist.com/gold-series-sought-metal-earth-part-1-5/ for some of the above data]

and yet...

- [paper] price of gold continues to fall in USD
- GDXJ is now down + 85% from April 2011 highs (was 169 now 25)

Re BDR specifically; I do disagree with your views Dan but don't have the time/ energy/ desire to go there.

Cheers
John