Gold Supported At $1,200 - Below That Level “Serious Production Cutbacks”

GoldCore's picture

Gold rose $3.20 or 0.25% yesterday to $1,257.90/oz. Silver rose $0.36 or 1.8% to $19.85/oz.

Gold is marginally higher in all currencies today. Gold appears to consolidating above the $1,250 level and strong support is at $1,200/oz.

Gold in US Dollars, 1 Year - (Bloomberg)

Demand for physical gold and silver remains robust. The U.S. Mint has raised its silver coin supply to 850,000 ounces this week. That compares with 761,000 1 ounce American Silver Eagle coins allocated last week, Michael White, a spokesman at the U.S. Mint, told Bloomberg. Sales by the mint last month rose to 4.775 million ounces from 1.2 million ounces in December.

The World Gold Council has confirmed that the all-in production costs to produce one ounce of gold is around $1,200 an ounce. A drop below that level  for a sustained period of time would have a significant effect on miners' production, World Gold Council Director of Investment Research Juan Carlos Artigas said yesterday.

If gold dips below $1,200 per ounce for a “sustained” period, serious production cutbacks are likely.

About 30% of the gold mining industry becomes unprofitable if prices fall below that threshold, the council estimates.


Massive capital writedowns from 2013, from the world’s largest gold miner Barrick Gold Corp. (TSE:ABX) among others, could also “impair future production for some miners,” said the council’s 2014 outlook.

Global mine production is likely to hit 2,980 tons in 2013, up 4% from the year before. Gold mines can take years to come online, up to 20 years after deposits are first discovered. The industry is also  beset by a shortage of qualified mining engineers.


“There’s a real cost of getting it out of the ground. And that cost has to be accounted for” said the Council.  The council’s view adds to existing research highlighting $1,200 per ounce as a key price threshold.

Declining scrap or recycled gold supply, which fell to a five-year low in 2013, exacerbates a “tight supply picture”, said Artigas. 


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eaglerock's picture

Just seems bizarre to me that put so much money, energy and capital into mining gold, and it after it is mined it just sits taking up space in some vault. 

Smiddywesson's picture

You can't use a fundamental argument to say gold has to be above $2000 by 2012, and be wrong, and then use a fundamental argument to say it can't fall below $1200 in 2014.

There are no markets anymore.  It's useful to use market theory to analyze what is being traded, but don't delude yourself and trust "reality."    


QQQBall's picture

The solution for low prices is low prices

dearth vader's picture

Is this the stuff that dreams are made of?

Bullion Vault's Adrian Ashe writes:

>> The hard-asset divisions of Western investment banks meantime continue to be cut or sold amid growing regulatory pressure and scrutiny, with J.P.Morgan now discussing a sale to privately-owned Swiss trading house Mercuria according to "two sources" apparently speaking to both Reuters and Bloomberg.

Australia's Macquarie Bank was reportedly keen to buy, but overlooked. << If this is true, Ed Steers of Casey's Gold & Silver Daily and silver analyst Ted Butler will gasp for breath.
orangegeek's picture

1175 is key support for gold seen on daily


we should continue to 1325, but it will be a slow process

One of We's picture

What was Hitler besides another bedwetting dictator bankrolled by JP Morgan?  

Four chan's picture

a great artist?

all you have to do is watch one of those goofy shows on discovery to see how much it

takes to get an ounce of gold to see how insane the present price is.

i mean everyone doing it is starving, living flake to flake paying for crazy fuel and equipment.


parker needs to go to college.

manofthenorth's picture

I have been mining Porcupine for years and can tell you that the TV version is a joke. Parker and Fred have not made a dime minig. If it were not for the freebies that come from the show they would already be done. We ramped up production at $1900 and had a terrible time making money at $1200. No new equipment , no new hires and enthusiasm has been crushed. We manage to keep going and look forward to the 2014 season , all 4 months of it , but if Gold goes under $1000 there will be NO production this Summer. SUPPORT MINERS and keep buying PHYSICAL only.

Side note Parker and his Granpa John are lying , cheating , backstabing assholes. I could tell you all some stories about the Schnabel clan. They are the biggest private landholders in S.E. Alaska.


Temporalist's picture

If anyone is interested:

China becomes largest importer of gold, some of it smuggled to India

Sufiy's picture

Rob Kirby: The Economy is Not in Recovery but Financial War

  Rob Kirby has a very interesting take on the recent emerging market currency crisis and Gold market developments. Is it the part of the ongoing Financial War? These attacks can be actually aimed at the ability of the rising powers to challenge the US Dollar reserve status and their ability to continue accumulate Gold.

Son of Captain Nemo's picture

Along with the suppression of GLD "the powers that be" of Western banks have decided out of the generosity and goodness of their own hearts to value the African landscape in the not too distant future -for altruistic purposes of the indigenous peoples  “Of course”???!

I'm sure the CIA with their front organization National Geographic will do the write up proud!’S_NATURAL_RESOURCES/32664/0/0/0/Y/M.html

Four chan's picture

why map, just ask china, they've done the work already.

fijisailor's picture

This is all fine and good unless we have serious deflation.  Then the cost of production goes down as long as energy costs go down too.  Panic for physical assets may offset that though.

Quinvarius's picture

They need to revalue gold to higher, to its correct price, to liquify the system without printing money.  And once all the gold is distributed, that is what they will do.  They have no choice.  They cannot use worthless debt as an asset to liquify the system, and printing money is going to cause massive inflation.  They need an asset.  This is gold's role.

dearth vader's picture

For what it's worth - Google translation (slightly edited) of a today's article in Dutch newspaper 'het Parooll'

>> The [diminished] value of the gold reserves of the Dutch Central Bank ( DNB ) [doesn't] cost the Dutch state any money . Writes that Finance Minister Jeroen Boom Dijssel today to the House in response to questions from PVV MP Tony van Dijck .

Due to the decline in the market price of the gold reserves of DNB was last year 7.6 billion worth less than a year earlier, to 17.2 billion against 24.8 billion euros. That paper loss is captured in the revaluation reserve of the central bank and through the profit and loss account. The dividend DNB to the State is not at stake, says Dijsselbloem.

The minister reiterated that he sees no reason to get [the Dutch gold reserves back to the Netherlands], which are largely located in the vaults of foreign central banks, still is 51 percent of the gold in New York, 20 percent in the Canadian capital Ottawa and 18 per cent in London. Only 11 percent is stored at DNB itself in Amsterdam.

These percentages have not changed in the past year. The spread over several sites, according [to] Dijsselbloem, enhances the security and availability of strategic gold reserves. DNB periodically evaluates whether the distribution needs to be adjusted.

[DNB] Also carries out a physical inspection annually with foreign custodians of the gold to be visited alternately. That happened recently in the third quarter of 2013 and then, no differences were found. <<

Comment: So, according to the Dutch CB and the Treasury, auditors have access to the vaults in NY to physically inspect their gold holdings? Remarkable!

fijisailor's picture

Is this the same "DIESELBOOM" of bail in fame?  Trust that guy's words on gold and you're seriously screwed.

dearth vader's picture

Yes, he is. His proper name is Dijsselbloem [pron. "dysle bloom"], Google Translate transmogrified that to Jeroen Boom Dijssel, as ZH readers know him as Dieselboom.

He's the Dutch Treasury Secretary and chair of the EU Financial Committee, (in)famous for giving away the bail-in policy as a future principle for failing banks in Euroland after the demise of Cyprus.

Remarkably, last week, he came out on top of the bunch in a Dutch poll of the most popular politician!

fijisailor's picture

Incredible.  Why the popularity?

dearth vader's picture

No reason given, just the poll results:

Google translation: >> The pollster also looked at the value that the voter has [for] 13 ministers. It should be noted that the ranking is led by four Labour Ministers: Dijsselbloem, Asscher, Timmermans and Plasterk. VVD [Liberal] Minister Opstelten completes the top five. Prime Minister Mark Rutte dangles down the list. Only minister Block scores worse than Rutte. <<

I think Dijsselbloem owes his "popularity" to his no-nonsense style and the fact that the popularity of politicians in general is very low. He simply happens to be the cleanest dirty shirt, for the moment.

If the choice is between a tape worm and a couple of Lyme infested ticks, most people will favor the worm, apparently. :D

RaceToTheBottom's picture

Thanks for the post.  Interesting.  Wonder if they care about remelting or whether the audit includes individual bar review?

dearth vader's picture

They don't give a hoot, I'm afraid, and regarding an individual bar review, that's exactly what I brought up for serious doubt in my comment.

satoshi911's picture

How long have we said.

We're in a DEPRESSION, this is normal cyclic correction, aka deflation.

Gold can and will go to 800, no problem,

Get over it,

Why even talk about it? Because advertisers call for discourse on bullshit.


All those that can buy gold did buy gold. Greatest fool theory. Now fools are out of money.

Now in Deflation people need to sell GOLD to eat. To live.

Sure GOLD might go up, but that would require a black-swan, ... odd's of happening is 100 to 1, ... meaning nada.


Fuck GOLD, fuck the stock market, get out and live.

Quinvarius's picture

You watch way too much TV. 

swass's picture

I love these gold articles.  Chances are if gold decided to drop back to the year 2000 lows, people wouldn't want it. So demand would not outpace supply, even with only the most efficient miners.  It is just like if oil dropped substantially, some of the most expensive methods for extracting would become unprofitable.  But the price dropping implies there is less demand for the current supply.  So what is the point of these articles?

presk_eel_pundit's picture

They could have written this same article substituting coal for gold. Same fundamentals. A lot of coal stocks were down 70 to 80% and now they've dropped even lower in the past few weeks. Production cuts haven't helped. Same thing could happen with gold miners. Nobody loves you when you're down and out.

pods's picture

Lemme take a stab at that. Your line of thinking would be correct if gold was actually an efficient market.

But, since the vast majority of gold trading is actually fractional reserve gold, there is a great danger of losing the underlying reserve that all these fractional reserves are based on.

This is due to the manipulation to keep the POG below market price.  

So, if demand for the physical commodity is NOT based on the POG, then this model will not hold.  

There are actually TWO prices of gold.  One for the commodity, which is based on production costs, and the other which is based on whatever they want it priced at.

The second price is dependent on the first, but they are not linked.  

Don't believe me?  Drop the POG to $800 and you will see what I mean.


Sudden Debt's picture

no shit... my miners are all bleeding like hell...

Save_America1st's picture

@Sudden Debt

weird...I checked my miners just now and are all happy and green.  Small consolation though...I've been stubborn and have held onto them over the last 3 years, so overall I'm bloody red as far as total value goes.  But I've added onto most of them during this long downturn, and I'm feeling pretty good that once the miners finally take off this year I'm going to have some kick ass fat gold nugget returns out of some of them!!!

I hope yours turn around too!  Til then we keep stackin' that phyzz!!! :-)

Marge N Call's picture

No shit, this sucks. Let me guess, you're the other guy in the world along with me that didn't dump them last year?? NEM, FCX, etc getting their daily ass-rape.

JimS's picture

Truth betold, I own them both, and yes they are down alot. No problem for me, as I've written calls on both, several times. All the calls have expired worthless, but I've pocketed the premiums. On NEM I've written the calls 3 times, and on FCX 4 times. A little secret here: 80% of the people that go long naked calls lose money. So, who is making the money? The 20% that own the underlying stock MAKE the fucking money by selling calls against their position.... PERIOD. I used to be a broker for Paine Webber 30+ years ago, and have been doing that strategy for those same 30+ years. I make money on it slowly at 15 to 20% a year, year after year, on all kinds of stocks, mostly dividend paying ones. Do I watch stocks soar and miss out on the "soar"? Yep, many times. Do I give a fuck? Nope. Because every Saturday that a stock gets called away by Monday morning I am "reinvested" with another "buy-write" strategy. It works like clockwork. Have I lost money on ones that go bankrupt, yep. But on the long haul I more than make up with the "winners".

Motorhead's picture

It's "obvious manipulation".  Just ask wanker Jim Sinclair and the gang at King World News.

PHantomofthemarkets's picture

Harmony Gold Mining has predictions of 1100-1150 costs for this year. Last quarter at 1220.

With mines at a cost of around 800 I don't think they are very much worried about lower gold prices. It doesn't look like there will be no demand for gold either...

Boris Alatovkrap's picture

“It is well for that citizenry of nation are not understand banking and money system, if they are, I believe there would be revolution before Tuesday morning.” Henry Ford, founder of Ford Motor Company

Save_America1st's picture

I've given about a dozen people G. Edward Griffin's book, "The Creature From Jekyll Island". 

If that book was mandatory reading for all American high schoolers in History class we'd also have a revolution in this country.  D.C. might be burned to the ground if the majority of Americans understood what is in that book.

I'm sure everyone on ZH has read it, but here's the link anyways just in case for any newbies:


Everyone I've gotten to read that book is now wide awake and knows what's going on now...It's great to see sheeple wake the fuck up and start taking control of their lives. 

Boris Alatovkrap's picture

Most safe place to storage of gold is NOT mouth - robber is sometime carry plier.

satoshi911's picture

Best place is up URANUS we both know this,... in all time man who have gold in mouth, lose teeth.

Man  who keep gold in URANUS keep gold.

Man who flash gold in mouth, lose gold quick.

Man who keep gold in ass have stinky fingers.


Reminds of the old mob story's about GUN's, man carry's gun, thinks he is big man, Bigger man take gun, shove up man's ass and fires. Man who had gun dies of terrible death.

Moral? Don't carry gun or gold in mouth unless you one bad MOFU.

JimS's picture

Dude: a little secret. Don't carry a conceled weapon if you not willing to use it.