Originally Posted by fullmetal
Mining companies are currently inflating their costs in press releases. The mining companies fear an exit from metals because there is so much on the market that they will be operating with excess capacity. The average cost of gold extraction is NOT $1200 per ounce, but these companies want everyone to believe this so that it creates a false floor. Just ten years ago the average extraction cost was under $200. Gold remains abundant and costs have not gone up six fold in a decade.
I know fellow geologists in the mining industry, they fear a price plunge. Several left the oil exploration industry to ride the precious metal surge and slowly shifting back to oil and natural gas.
As the dollar strengthens my investments go overseas. My buying power is spiking.
Sure, they might be but the reality is that many of them are laying people off to the tune of more than half of their work force. Something is causing that. If they were still making money while lying about the cost of production, why not retain people? A "false floor" is dually created by the mere basis that this "floor" is valued in currency that has no value, only perceived. Whether extraction costs are $20/oz or $2000 oz, the fact remains that we told Germany it's going to be 7 years before they can have THEIR gold back that is supposedly in the vaults under the Fed in NYC. If gold is so 'abundant' why will it take us seven years to procure Germany's gold that is, supposedly, already sitting in a vault?
I think the shortage of available gold is in the form of production ready gold. Such as, the blanks needed to mint the coins. There are slight delays now but, with mines slowing production due to high costs... it's going to be felt in the markets one way or the other. They may be bluffing on production costs and, in turn, will cause a shortage driving up demand/prices even more than necessary in the long run.
I don't know that anyone will ever pinpoint the cost of mining an oz. of gold/silver/platinum, etc. It's like a car. The company can tell you the cost of every component, right down to the thousandth. Ask what the total production cost of the vehicle is and, suddenly, no body has any idea.
The production costs of oil aren't high. The higher costs are more a result of trade restrictions, unnecessary controls and political forces. There is a reason all these countries want their gold back. I don't think their concern lies in what is it valued at, currently. They know that any revaluation after whoever decides to take that step of a gold backed currency is what will really matter.