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If Gold Was "Just A Commodity" What Would Be Its Support Price

Tyler Durden's picture


Today's bounce back in gold prices is fading into the close and as Barclays' Suki Cooper notes, despite some physical demand response to lower prices, it has not been sufficient to combat the overall decline. In the absence of support from physical buying, where does fundamental support materialize? Should gold just put on its commodity hat, instead of its increasingly more popular currency one, its cost of production should provide some guidance.

Via Barclays' Suki Cooper,

Last year, the average cost of production was $673/oz, and the marginal cost of production (90th percentile) was $1104/oz (Gold cash costs drive higher, 22 March 2013).

Assuming sustaining capex at around $200/oz, this indicates cost support at around $1300/oz, based on last year’s data; our global database encompasses 35% of global production.


Should prices dip below marginal cost, around 10% of production under our cost curve becomes cash-negative, representing an estimated 262 tonnes of cash-negative gold production globally. The bulk of this at-risk production is from South Africa, according to our database. Also putting pressure on gold prices is the acceleration of ETP outflows, which have already reached 66.5 tonnes for the month-to-date (until 12 April 2013). Nearly 320 tonnes of gold ETP holdings are cash negative below $1400/oz (assuming only those shares created above $1400/oz have been redeemed above $1400/oz, thus, this estimate is likely to be greater).


Although a reduction in mine supply would need to counter the supply from ETP outflows, this has raised the question whether producer hedging could gain traction. Hedging activity over the past couple of years has predominantly been related to project financing.


Looking at the 20-year price low in 1999, when prices dipped to $252/oz, prices traded a third above the annual average cash cost. The average cost of production was quite stable in the 1990s but has risen by an average 16% y/y over the past five years. The marginal cost of production has risen by 69% over the past five years, rising by 15.2% last year.


Our cycle average forecast is $1125/oz (which denotes the cost-driven estimate of the minimum sustainable price over a business cycle) before taking into consideration sustaining capex, therefore, given that cost pressures are rising and labor disruptions persist, from a fundamental perspective, support comes into play initially at around $1300/oz before a substantial quantity of mine production is put at risk.

And of course, should the central banks of the world succeed in driving the price of gold to or below its costs of production (repressing yet another asset class into stocks) then we fear the repercussions will backfire from a combination of bankruptcies, unemployment, and as we have already seen in Africa - severe social unrest.


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Tue, 04/16/2013 - 17:13 | 3458165 Gringo Viejo
Gringo Viejo's picture

But it's not "Just" a commodity.
One may as well ask......
What if Spartacus had close air support?

Tue, 04/16/2013 - 17:23 | 3458185 AllThatGlitters
AllThatGlitters's picture

Not sure you can call this a "fade" quite yet:

It might be, but it remains to be seen.  If it rises from here, we have a higher low.  If it falls from here but bounces off yesterday's low, you may have a double bottom.

However, if it falls from here, and plunges through yesterday's low, well, the article provides a nice support level to look forward to, or perhaps a nice new buy point for the next paycheck to come in.

But as Gringo notes, Gold isn't "Just" a commodity, so perhaps the article, if read the right way, is really telling us that gold is screaming buy right now.  

Tue, 04/16/2013 - 17:27 | 3458208 kaiserhoff
kaiserhoff's picture

It's surprisingly difficult to get real time data, but here's a start.

When I got serious about looking at demand, the real stunner was that India is still the leading player.

After Cyprus, that must be changing fast.

Tue, 04/16/2013 - 17:33 | 3458217 Pinto Currency
Pinto Currency's picture


What's the cost of production of a $100 dollar bill?

The market is being prevented from using it's choice of gold and silver as legal tender so that burning mound of paper is king for market transactions until it completes its self-immolation.

These paper currencies are all Ford Pintos with nitroglycerine in the fuel tank. 

Tue, 04/16/2013 - 17:40 | 3458262 JohnnyBriefcase
JohnnyBriefcase's picture



I just wanna get the new iPhone 6 when it comes out. I hear it will have a retina scan locking system and laser guided txt capabilities.

Tue, 04/16/2013 - 17:44 | 3458270 Pinto Currency
Pinto Currency's picture


The i-6 also a button you can push to talk live with Steve Jobs.

Certified real by Ben and Barry.

Tue, 04/16/2013 - 17:55 | 3458312 Joe Sixpack
Joe Sixpack's picture

See 15APR2013s inventory of 100 ozt. bars on APMEX graphically. People sure took advantage of the sale!

Tue, 04/16/2013 - 18:13 | 3458354 undermind
undermind's picture

Check out the cost over spot for silver eagles, if you can find them.

Tue, 04/16/2013 - 20:30 | 3458480 Kirk2NCC1701
Kirk2NCC1701's picture

Just came from PM shop...

At 90% purity, the gold Eagles were the most common. Got the last Philharmonic and last Panda. All else on back order. One guy got 5 Eagles, and a 10 oz bar of Ag. Another took all remaining (20 silver Eagles).

An Indian woman, then 2 Indian guys (all from a known tech co., judging by their badges) got out the check books to place order. It's been that kind of a day.

Takeaway:  In spite of what some say about possible lower paper-gold prices, it won't matter!  At this point it, lower prices will do little to increase demand.  Supply chain is already stretched to limit.  A still lower price would only lead to a full bullion run, which would lead to...



Tue, 04/16/2013 - 17:58 | 3458315 SafelyGraze
SafelyGraze's picture

Dear Mister Durdenz,

Thank you for your interesting question!

First off, gold is indeed a commodity. That is, it's an asset. A collectible. Basically, it's jewelry.

But to your main point: how much would it cost? Well, we're glad you asked that.

Let's say gold is worth 1,400 dollars. Admittedly, that estimate is quite high, but we'll go ahead and use it for our example.

Now you might know already that those dollars cost money to produce. How much money? Why, you can find the answer to *that* right here, at the US Bureau of Engraving!

At 8.7 cents per not, you're looking at about 122 dollars to print up the 1400 you'd pay for an ounce of the shiny jewelry medium.

But wait. What if you pay with 100 dollar bills?

Well, that's a very good idea, Mister Durdenz! Because, through the miracle of high-efficiency printing, it costs the very same 8.7 cents to print a hundred dollar bill that it does to print a one dollar bill!

Confused? Don't be! Just be grateful for the savings!

Because now you only need 14 of those hundred dollar bills to buy that little old ounce of jewelry medium!

And at 8.78 cents per bill, that brings the cost down.

Way down.

For only a dollar twenty two cents, we can print those 14 hundred dollar bills with which to buy an ounce of gold.

And so there you have it.

The total cost is a little over a dollar for an ounce of gold.

All in all, you can probably find a better way to spend that dollar, can't you Mister Durdenz?

You sure can!

For example, you can shop at the dollar store!




Tue, 04/16/2013 - 17:59 | 3458322 Joe Sixpack
Joe Sixpack's picture

How many ounces of gold can you buy with a $trillion platinum coin? How many angels can dance on the head of a pin? What is "is"?

Tue, 04/16/2013 - 18:03 | 3458332 PiratePawpaw
PiratePawpaw's picture

Was Math an elective at your school?

Tue, 04/16/2013 - 18:26 | 3458378 Bobbyrib
Bobbyrib's picture

He is trolling.

Tue, 04/16/2013 - 17:46 | 3458282 PiratePawpaw
PiratePawpaw's picture

Despite my advanced decrepitude, I continue to be amazed at how easily the masses will abandon reason in favor of herd metality....Has anything changed???...My silver still weighs the same...Central banks are still printing/spending like drunken sailors....I would still rather have a silver morgan in my pocket than a $1, $5, $10, or $20 Bernanke buck....If you havent sold, you havent lost anything.....Play with your MONEY occasionally and your family alot.....sleep well, I do.

Tue, 04/16/2013 - 18:21 | 3458371 Whalley World
Whalley World's picture

Sold?  I would suggest that the astute of this board took the opportunity to take advantage of the Tax Day Sale.  I just added nicely to my vault and will keep doing so, rise of fall.

Who exactly invested in Silver to sell now?  This is the decade to stack!  Long Eric Sprott.

Tue, 04/16/2013 - 18:24 | 3458376 mess nonster
mess nonster's picture

Go ahead. Buy that physical gold. Sure, it will be worth something, about 35/oz, when it gets nationalized (easier to say than "rehypothecated", although "stolen" is the bedrock term).

Fer fuck's sake, brain dead gold bugs, can you say "D E F L A T I O N"???

Sure, Ben's trying to blow a bubble, but there are too many holes in it. The gold hole is just one of them.

If gold holds its value, then its decline in fiat valuation indicates (conspiracies notwithstanding) that despite all the money printing, QE, etc, we're in a DEFLATIONARY cycle.

Good, God, do I have to give the reasons?

1. Peak Oil. Dont EVEN tell me about the Bakken or fracking. We just don't have cheap energy any more.

2. Population decline. Guess what folks, we've seen the peak of the planet's human population. It's all downhill from here. Less people means negative real growth, which means that the money supply will shrink, not grow.

3.Derivatives. Need I say more? Counterparty risk is everywhere, eating away at the money supply like a horde of radioactive earthworms.

4. More a symtom than a root cause, but...velocity. There's no fucking velocity! If inflation were the trend, there would be some money changing hands, but no, the speed pf money is just about... fucking zero.

5. Fukushima. Ionizing radiation is inherently bad for growth of any kind. Fukushima can only get worse, not better, with global consequenses.

So, yeah, buy that gold!!! If you are able to keep it from DHS, (and they will break down your door to confiscate it ), when you HAVE to spend it, you might be able to buy a loaf of bread, or a few rounds of ammo, per oz. Black markets operate strictly on market principles, and reality is a BITCH, bitchez.

I suggest buying arable land with water, and learn how to live a rural lifestyle. By "rural lifestyle" I mean "redneck", "cracker", "trailer trash" "sharecropper", and any other epithet for rural poverty you care to add to the list. Your garden, junk pile, and ability to make shit work with baling wire and bubble gum will be your key to successs, which will be ruthlessly redefined downwards from iPhones to beans.

Fucking gold...I shake my head. Buying gold is a vote for the status quo. Dream on!


Tue, 04/16/2013 - 18:33 | 3458388 AgShaman
AgShaman's picture

Fair value for gold is $42 bernanke bucks....if the nationalization/confiscation commences....

generics will get you 42 bucks

Artistic offerings like the eagles and buffalo's put out by the US Mint will be worth $50 bucks

buh-bye now....move along "Unwashed Soylents"

Tue, 04/16/2013 - 18:33 | 3458389 fonzannoon
fonzannoon's picture

why would they break down my door to confiscate it if all the reason you gave deem it worthless?

Tue, 04/16/2013 - 18:47 | 3458464 Panafrican Funk...
Panafrican Funktron Robot's picture

Indeed.  And even if your average stacker, that might have 10 oz. if they really have their shit together, why would that be more desirable to confiscate than:

1.  401K/pension holdings.

2.  UST revaluations

3.  Unsecured bank deposits

4.  Property via mortgages

All of which are so much more profitable to confiscate.  I agree with the "bug" label for gold holders, we are a bug on the windshield vs. the total fiat valuation of all assets.  We don't matter nearly enough for anyone to even slightly give a shit.  

Unless, of course, it turns out that fiat itself is really the mother of all bubbles, and gold really is the only way to actually store wealth, even in a deflationary collapse.  

Tue, 04/16/2013 - 23:19 | 3459400 Honey Badger
Honey Badger's picture

Death wish?

Wed, 04/17/2013 - 00:02 | 3459539 sablya
sablya's picture

There is a tremendous amount of money in the system, sitting there like water behind a dam.  Can you imagine any scenarios which would cause that money to start flowing?


First, why is it being held?  Because the cost to hold it is small.  There is no need to exhange it for goods and services because the future cost of those is the same as the present cost.  But, let the dollar begin to devalue and the dam springs a leak.  Let it lose a bit of its reserve status and it will be impossible to hide behind the BLS statistical machinations.  The leak grows a little larger.  It's a con-game at this point.  But once it starts to go, it's going to go very rapidly.  The velocity will go from zero to sixty in a few days.  The cost of holding dollars will become astronomical - just like in the Weimar Republic.  People will want to pay for their meals before they eat because it will be twice as much when they are done.  Then it will be too late to buy gold and silver.  No one will take your paper to even wipe their asses with.




Wed, 04/17/2013 - 04:44 | 3459871 democratickindeling
democratickindeling's picture

I like your of those that make you go Mmmm.... in Zimbabwe they were paying for loaves of bread with grains of gold (so what's different?). I'm not sure leveraging the future tax receipts into T-bills or 'saving' companies making products nobody wants is sustainable... the Chinese are losing their appetite for US T-bills.

sooner or later the music will stop and there will be very few chairs left....

Peak Oils - perhaps THE most manipulated industry. Pop. Decline - Billions of useless eaters so food&water prices are rising... Derivatives - gambling? never understood them... Velocity? Money is being swapped for GOLD. Fukushima - you right, it's a game changer, Japan is screwed...welcome to 500 years of hell.


Tue, 04/16/2013 - 19:24 | 3458609 defencev
defencev's picture

Has anything changed???...My silver still weighs the same...Central banks are still printing/spending like drunken sailors....I would still rather have a silver morgan in my pocket than a $1, $5, $10, or $20 Bernanke buck....If you havent sold, you havent lost anything.....Play with your MONEY occasionally and your family alot.....sleep well, I do.

You sure can stay in your cukcoo land as long as it is feasible for you but do not expect the real world to follow your mad fantasies.

My observation is that more ignorant the jerks are the more difficult to kick them out from their world of pervert dreams.

Tue, 04/16/2013 - 21:41 | 3459100 PiratePawpaw
PiratePawpaw's picture

Was there a point in there somewhere?........I was outside with the wife watering the garden and drinking coffee as we watched the hummingbirds and the sun setting on the lake. 

My point:....I already took care of everything else. I spend my extra adding to my stack....and yes, i sleep quite well because of it.....

Sweet dreams......

Wed, 04/17/2013 - 11:02 | 3460835 Jafo
Jafo's picture

As a drunken sailor I object to your insinuation that we spend like a central wanker.  I stop spending when I run out of money.

Tue, 04/16/2013 - 22:58 | 3459312 Tapeworm
Tapeworm's picture

 COST of production means nothing with a monetary metal such as gold. Silver no longer has a vast suplly overhang as does gold but cost of production is not a consideration.

 The writer did mention the backlash from ZA mines if they shut down from uneconomical production costs, but that is a political issue.

 The supply overhang is , or had been about 30 years of production. That is what makes gold the best monetary commodity in that supply has little to do with current price.

 As far as I can tell, none here were buying 1/!0 ounce "Eagles" in 2001 when they went for zero premium at 28.00/piece and that included shipping. That was below the cost of production and when taken with the minting and shipping it was way below the cost of just about any miner.

 Goldfields bought a pretty big whack of the bullion that the BoE was selling as they could not produce at those prices.

 I am saying that cost of production has a tiny effect on price of gold in the shorter term of a few years. The other PMs are far more geared to production price because of the small inventory of them as compared to gold.

 Vote me down all that you like, it is just a fact.

Tue, 04/16/2013 - 23:46 | 3459503 Tapeworm
Tapeworm's picture

for those that bought glod in 1999-2001 there were some fantasy bargains to be had in buying stuff for glod.

 A house that I bought for considerably less than a kilo of glod gets me 1000/month rent

 I bought scientific instruments to give to a very small Lutheran high school that makes them better equipped than the rotten public schools that rip me off as a taxcow every year. The deals out there on truly good educational stuff for the youngsters that I do not know, but do care about were stunniningly cheap when measured in gold, so I did it. I attended that school for only one year back in the 1960's but did have fond memories of the way that we urchins were treated by the underpaid faculty.

 I never stole from those that follow me as have done most of the baby boomers. I try to inform them on what they can do to be free as much as possible anymore. I expect those of you that can help the worthy latecomers to the scams to do what you can for them too.



Tue, 04/16/2013 - 18:19 | 3458346 Urban Redneck
Urban Redneck's picture

Aparently the cost of $100 bill for Nomura is 1.8B euro, regardless of the number of worthless pieces of fiat involved.

Bankers worrying about their counterparties don't bode well for those hoping to avoid a repeat of 2008-2009 


Which raises the question: if the banks won't extend credit, who is going to pay the producers to pull gold or oil out the ground and transport it to market, and what does that do to the available supply?

Tue, 04/16/2013 - 17:28 | 3458213 Pinto Currency
Pinto Currency's picture


Tue, 04/16/2013 - 17:24 | 3458202 boogerbently
boogerbently's picture


Silver: NO Maple leafs, Silver American Eagles shipping ONLY outside USA.

NO Monster boxes.

Gold: American Eagles avail. Maple Leafs ONLY outside USA, American Buffalo ONLY shipping IN the USA.

Tue, 04/16/2013 - 17:49 | 3458296 astoriajoe
astoriajoe's picture

they got plenty of those 1Kg koala plates though.

wtf am I supposed to do with that thing.

Tue, 04/16/2013 - 17:56 | 3458314 Joe Sixpack
Joe Sixpack's picture

See 15APR2013s inventory of 100 ozt. bars on APMEX graphically. People sure took advantage of the sale!

Tue, 04/16/2013 - 18:17 | 3458361 ebworthen
ebworthen's picture

Yesterday (April 15th) was the last day for U.S. Taxpayers to allocate gold into an I.R.A. for the 2012 tax year (annual rape).

Tue, 04/16/2013 - 17:29 | 3458215 Stoploss
Stoploss's picture

It's the FED's scorched earth policy...

Tue, 04/16/2013 - 20:08 | 3458512 Kirk2NCC1701
Kirk2NCC1701's picture

= Weapons of Metal Destruction.

Tue, 04/16/2013 - 18:05 | 3458339 WhiteNight123129
WhiteNight123129's picture

Forget Gold guys, this is not where the weakness is.

They had to take it down to avoid the Japanese public rushing on Gold.

Now there will be some side effects to this take down. And the side effect could be another deflation in the US. And this time, oops, it is going to be bad.

Crushing Gold from the powers that be is stupid, it can create a self-fullfilling deflationary collapse. Gold shapes inflation expectations. If gold gets crushed further this is very very risky.

They might just have shot in their foot thinking they were doing something smart.

They could have chosen a nice stagflation now they might be in for a hyperdeflation followed by hyperinflation.


Tue, 04/16/2013 - 18:21 | 3458368 Bastiat
Bastiat's picture

Bernanke is like a god. He can fix all prices.  There will be no problem.

Tue, 04/16/2013 - 21:23 | 3459051 traderjoe
traderjoe's picture

All he needs is 15 minutes.

Tue, 04/16/2013 - 23:50 | 3459510 sablya
sablya's picture

This is a very insightful comment.  Thanks.  The law of unintended consequences strikes again.

Tue, 04/16/2013 - 18:34 | 3458398 unwashedmass
unwashedmass's picture


"some physical demand"? hello? i was willing to drive an hour away today to pick up some physical, and there is NOTHING availabl.e 

some physical demand, my ass. 

Tue, 04/16/2013 - 17:14 | 3458166 WayBehind
WayBehind's picture

Its Cheap! Buy!

Tue, 04/16/2013 - 19:48 | 3458691 Crash N. Burn
Crash N. Burn's picture

Its Cheap! Buy!


So cheap gold and silver miners are facing extermination:


"...a month ago, at an international mining conference; we had a large group of geologists predicting roughly half of all these mining companies would go bankrupt in the next three months.

That was before the current, orchestrated slaughter....

..Yet here we have the same bankers who refuse to lend money to the gold and silver miners because “prices are too low” publicly declaring they are “shorting gold” because (supposedly) “prices are too high.” This comes as demand for gold and silver metal (not paper) remains at all-time highs. Even the myopic buffoons who call themselves “U.S. regulators” should be able to spot the corruption here."


CME Group Destabilizes Precious Metals Markets 


Methinks supplies are about to get MUCH tighter!

Tue, 04/16/2013 - 20:23 | 3458840 PhilofOz
PhilofOz's picture

Well if I was a banker I'd be using the excuse that prices are too low to lend on, when all along they are thinking of the possibility of a smackdown and these miners would go under with their money anyway. They are banksters, they are never going to tell the truth.

Wed, 04/17/2013 - 02:16 | 3459755 Debugas
Debugas's picture

instead of borrowing miners are supposed to be selling gold/silver and expanding in that way. If production costs are too high then they should lower them (lower wages etc) and if they cant then shut down

Tue, 04/16/2013 - 17:15 | 3458167 Soda Popinski
Soda Popinski's picture

One million dollars.  ( in the Dr. Evil tone)

Tue, 04/16/2013 - 17:19 | 3458186 Major Major Major
Major Major Major's picture

A gold atom walks into a bar and the bartender says "AU, get out!"

Tue, 04/16/2013 - 17:27 | 3458207 boogerbently
boogerbently's picture

A priest, a minister, and a rabbi walk into a bar, and the bartender says, "What is this, a joke?"

Tue, 04/16/2013 - 17:43 | 3458268 Sudden Debt
Sudden Debt's picture

A man walked into a bar holding an alligator. He asked the bartender, "Do you serve bankers here?" The bartender said, "Yes, we do!" "Good," replied the man. "Give me a beer, and I'll have a banker for my alligator."

Tue, 04/16/2013 - 20:56 | 3458978 HulkHogan
HulkHogan's picture

Ben Bernanke and a duck walk into a bar.

The bartender says, "Where'd you get that piece of shit."

Bernake says, "That's not a piece of shit, that's a duck."

The bartender says, "I was talking to the duck."


Tue, 04/16/2013 - 17:15 | 3458171 fuu
fuu's picture

If gold is a currency what is 1 hour of labor worth?

Tue, 04/16/2013 - 17:19 | 3458178 akak
akak's picture

Gold is NOT a currency (currently), but it is money.

Tue, 04/16/2013 - 17:20 | 3458183 fuu
fuu's picture

Does that really change the question?

Tue, 04/16/2013 - 17:29 | 3458216 Yen Cross
Yen Cross's picture

 fuu/ you're an extremely intelligent person. You do what I do. I overthink the obvious.

Tue, 04/16/2013 - 17:38 | 3458257 fuu
fuu's picture

I don't know about any of that, but thank you.

Just trying to wrap my head around how to value things outside of dollars/euros/yen. What is one hour of labor worth in gold without looking at the spot/futures/paper price.

It may be important someday.

Tue, 04/16/2013 - 18:03 | 3458281 Poor Grogman
Poor Grogman's picture

Not a lot unless you have something special to offer

Edit. That's the problem for a lot of people when a pure gold standard is discussed. Many of our so called " jobs" ( particularly those in government) would be virtually worthless. Gold standard would bring society closer to a meritocracy for wage earners. There would also be a flow of gold toward those who control the means of production, such as primary producers, etc. Instead of the ordinary people going deeper into debt while the elite get rich. You may see a different type of stratification appear, as consumer credit and other forms of debt became unavailable to the working poor. While the production owners had steady inflows of gold.

In other words a very different society.

Tue, 04/16/2013 - 17:47 | 3458286 Yen Cross
Yen Cross's picture

 Fuu you are a gifted person. You have great insight. It's been a pleasure to make your aquaintance.

Tue, 04/16/2013 - 17:48 | 3458291 fuu
fuu's picture

Domo arigato Yen Cross-san.

Saki on me someday, maybe.

Tue, 04/16/2013 - 18:08 | 3458331 Yen Cross
Yen Cross's picture

 Soon My friend. I'll take a screen shot of what it looks like in Japanese.

Tue, 04/16/2013 - 19:07 | 3458532 Kirk2NCC1701
Kirk2NCC1701's picture

I like Yen. Last nite he blogged a comment to me that made me crack up.

Tue, 04/16/2013 - 19:58 | 3458736 new game
new game's picture

fuu-jackshit as no one wants it as payment- i have tried several times. for guns. if anyone would be interested it would those wack fucks(hehe;-)

they all said the same thing wtf am i gonna do with this...

so if that helps-cool beans

but otherwise to convert ya gotta bend over and get comissioned...

or hold til ya die or the world as we know it goes off the edge(as if it isn't already).


Tue, 04/16/2013 - 17:46 | 3458287 Temporalist
Temporalist's picture

It depends on what the labor is doesn't it.  If it's digging a hole and then refilling the hole it's about 1/1,000 oz.  And if it's breaking windows..well that's priceless.

Tue, 04/16/2013 - 17:53 | 3458307 astoriajoe
astoriajoe's picture

I'm tempted to take one ASE and try to exchange it for one or two lap dances at my local gentleman's club.

I don't want to give up the silver though.

Its funny how it makes a difference. I'll give her a bunch of fiat, but no silver.

Tue, 04/16/2013 - 18:09 | 3458342 exi1ed0ne
exi1ed0ne's picture

Well the strippers don't appreciate it because it's cold and doesn't stay tucked into the thong.

Not that I would ever, ahem, attempt such a thing.

Tue, 04/16/2013 - 18:27 | 3458363 McMolotov
McMolotov's picture

Each stripper, all by herself, has made more people happy in one day than all the bankers have collectively throughout history.

Tue, 04/16/2013 - 17:48 | 3458292 Bizaro World
Bizaro World's picture

fuu - to answer your question, more information is needed.  In short, it depends.  Depends on who you are asking and what you are asking them to do. Also depends on where in the world you are asking the question. I suspect you could get many hours of manual labor for a few grams of gold in Zimbabwe...

Tue, 04/16/2013 - 17:50 | 3458298 fuu
fuu's picture

I'll keep working on the question then.

Thanks all.

Tue, 04/16/2013 - 20:01 | 3458755 Stuntgirl
Stuntgirl's picture

Fuu, I did ask myself  the same question when trying to set a stacking goal.

Gold used as a currency in Zimbabwe, with production and supply lines collapsed (and circumstances might dictate what an hour of your time is worth), I saw many Zimbabweans agreeing independently that it took 3 grams of gold to keep one adult alive for a day. Many attempted to pan this amount for 12 hours a day, so that'd be the cost of basic manual labor for a day.

I used that as my minimum requirement for gold holdings, 3 grams per day for 2 people for 2 years.

Once I reached that amount I tried to refer to what I know about labour payments at times when gold has been a currency. You need to adjust for population increase. Many victorian novels reflect payments for yearly labour in pounds sterling, for example. But it becomes fuzzy.

Tue, 04/16/2013 - 20:24 | 3458837 fuu
fuu's picture

Good reply thank you.

Tue, 04/16/2013 - 20:44 | 3458920 Stuntgirl
Stuntgirl's picture

Sorry, typo. 0.3 grams.

Tue, 04/16/2013 - 17:50 | 3458300 toto
toto's picture

You have to get a job first.

Tue, 04/16/2013 - 19:45 | 3458680 noless
noless's picture

working primarily with iron has severly degraded my faith in mild steel, i used to view it as impenetrable, now it seems like butter.


about as useful as a padlock in a metal shop.. <(me)




locks only keep honest welders(people) out..


Tue, 04/16/2013 - 20:54 | 3458962 Vint Slugs
Vint Slugs's picture


Go here to read an updated version (reflecting gold and silver prices in 2011) of George Reisman's 1997 essay on how to value assets in terms of bullion and not fiat:

Wed, 04/17/2013 - 08:25 | 3460139 fuu
fuu's picture


Tue, 04/16/2013 - 23:42 | 3459488 sablya
sablya's picture

The bottom line is that that question is unanswerable because gold is fundamentally a medium of exchange.  The amount doesn't matter at all but scales with the cost/amount as long as the amount is convenient (neither an infinitesimal speck nor a truckload).  But, consider, what is one hour of labor worth in terms of your daily bread, your daily shelter, your daily clothing?  If you must work more than one day for your daily needs, then you're in big trouble.  If you can manage to work one hour for your daily needs, then you're doing great because time is more valuable than gold.  And wisdom is more valuable than time.

Sun, 05/12/2013 - 00:52 | 3553013 Banjo
Banjo's picture

You're not that smart.

One hour of labor is worth what value it brings to you. It might be a grain of gold it may be more than you can offer.

Tue, 04/16/2013 - 17:48 | 3458293 Lets_Eat_Ben
Lets_Eat_Ben's picture

A number, that like many others, should be determined by market forces. How skilled are you? What is the ratio of Au to USD, OIL, DOW, etc.

It's a complicated question with no easy answer.

Here's an easy question: why work a lifetime for an arbitrarily created currency? In an instant your life's savings could be worth an ounce of silver.

Tue, 04/16/2013 - 17:22 | 3458189 Diogenes
Diogenes's picture

If gold is a currency what is 1 hour of labor worth?


Doing what? I have worked for 90 cents an hour (pumping gas, pruning Christmas trees) to several hundred per hour (speculating).

Tue, 04/16/2013 - 17:50 | 3458297 Lets_Eat_Ben
Lets_Eat_Ben's picture negative several hundred an hour speculating.

Tue, 04/16/2013 - 19:46 | 3458684 Diogenes
Diogenes's picture

Ha ha ha Touche.

Tue, 04/16/2013 - 17:39 | 3458258 n8dawg84
n8dawg84's picture

if you get paid in gold then one hour of labor is worth whatever amount of goods/ services that amount of gold buys you. It has actually bought the same amount of goods/services throughout time

Tue, 04/16/2013 - 21:11 | 3459019 EINSILVERGUY

In Zimbabwe they work all day panning to get .03 grams of gold.

They need that just to survive. At $1375 thats $44.21 per gram or $13.26 per day.

Assuming an unrealistic 8 hour day then its $1.66 per hour.  12 hour day $1.11



Tue, 04/16/2013 - 21:11 | 3459023 EINSILVERGUY

My decimal is off by one .30 Grams

Tue, 04/16/2013 - 17:14 | 3458172 TheSilverJournal
TheSilverJournal's picture

The price of production is almost irrelevent as only 1% to 2% every year is added to existing stocks.

Tue, 04/16/2013 - 17:22 | 3458188 akak
akak's picture

True, although I would modify that statement by phrasing it as "The cost of production of gold is almost irrelevant  to the price of gold in the short term."  If the price of gold were to be suppressed below the cost of production on an ongoing basis for a number of years, it would indeed begin to become relevant.

Tue, 04/16/2013 - 17:46 | 3458284 TheSilverJournal
TheSilverJournal's picture

Absolutely. And the 1.5% does mean more than normal because the marginal increase in supply is needed to keep the hypothication ponzi going.

But the stampede out of fiat when rates rise, or when hyperinflation is hit as they print more to keep rates from rising, will cause gold to hit a min of $10,000 no matter the quantity mined.

Tue, 04/16/2013 - 18:08 | 3458341 kito
kito's picture

how can one determine what gold is worth outside of todays currency based system based on factors such as production, when the cost of production itself is valued in todays currency based system.......

Tue, 04/16/2013 - 18:33 | 3458387 TheSilverJournal
TheSilverJournal's picture

Real terms. It's impossible to talk about the effects of a change in the value of a currency (which many try to do) without talking in real terms. For example gold will hit at least $10,000 in real terms, or will be worth the same amount that $10,000 buys you today, 4/16/2013.

That's a little different than answering your question because it is not a very good question, but it sounds like it will be helpful for you. Your question is kind of a meaningless gotcha question.  Because today our monetary system is a fiat ponzi and there's not need to base what gold is worth on factors of production because all you need to do is go to to see what it's worth today.

Now, if you're trying to figure out what gold will be worth in the future when fiat collapses, that's a different story. Basically you have to look at where wealth is stored now and where that wealth will move to when there is no fiat, the bond market becomes a fraction of its current size, and the malinvestments created from centrally planned interest rates are exposed and the the wealth that many thought they had is revealed to be an illusion (real estate, equities). What will the masses rush into to avoid all of their life savings being wiped out? What portion of the world's money will be stored in gold and how many goods and resources will exist when the credit created malinvestments are cleard? And if you want to turn this into an after fiat collapse production question, the question might be, "How many oz of gold does it cost to produce an oz of gold?

Tue, 04/16/2013 - 23:21 | 3459404 Lucius Corneliu...
Lucius Cornelius Sulla's picture

So, if it costs more than 1oz of gold to produce an ounce of gold then who is going to mine it?  Its the same question.  As long as it costs less to extract gold from the earth than it costs to mine then supply will increase until the cost catches up to production.

Tue, 04/16/2013 - 22:21 | 3459213 jomama
jomama's picture

whoa dude, you managed a post without the word 'cash'.


Tue, 04/16/2013 - 17:18 | 3458176 bank guy in Brussels
bank guy in Brussels's picture

And I think BITCOIN has been dipping closer to its 'cost of production' too ...


Tue, 04/16/2013 - 17:32 | 3458229 Dewey Cheatum Howe
Dewey Cheatum Howe's picture

Wait until the Chinese citizens start speculating with bitcoins. There was this thing called Q-Coins which was virtual currency they used to speculate with. Wait until they find out about bitcoins and how it isn't so easy to shut it down as it was Q-coins. They love puke inducing speculative roller coaster markets over there. You people are too quick to write things off for dead.

 BEIJING, Nov. 16 (Xinhua) -- China's central bank has threatened to step into a debate on a "virtual currency" issued by an Internet firm and bring it under government supervision.

    The currency is the Q-coin issued by Tencent, a leading Internet community operator, for the users of QQ, an on-line chat room that had 220 million users by March.

    It can be purchased with bank cards, telephone cards or QQ cards at an official price of one yuan (12.5 U.S. cents) and was originally intended to be used in buying on-line services providedby Tencent, including electronic greeting cards, cartoon portraits,chips in on-line QQ games and anti-virus software.

    But many people have begun paying Q-coins when trading among themselves and in buying commodities and services provided by other websites.

    The operators of some Internet forums reportedly receive Q-coins as their wages.

    There have been reports that some people earned thousands of yuan per month by selling Q-coins won in on-line QQ games, where 10,000 points can be changed into one Q-coin.

    The People's Bank of China (PBOC) said it would closely monitor the "virtual money", amid concerns that it may impact China's currency if it was left uncontrolled.

    The bank would put the Q-coin, a kind of popular "virtual money", under supervision if it entered into circulation, sources with the PBOC told Xinhua.

    However, Yu Guofu, a counselor with the Internet Society of China, dismissed the fears, saying the Q-coin was only a commodity,not a real currency that can be converted into the yuan.

    It was worthless for people who were not QQ users, Yu argued.

    Li Chong, a professor of finance with the Beijing Normal University, even denied the Q-coin is "virtual money" because it is "neither a medium of exchange nor a store of value".

    However, legal expert Zhao Fujun argued that speculators who bought large amounts of Q-coins at a low price and resold at a profit had made the "virtual money" circulate like a hard currency.

    Tencent said it would crack down on illegal sales of Q-coins in conjunction with the police, according to a report in the Beijing News.

    Yang Tao, a legal scholar, pointed out that as China's legal tender, the yuan must be offered in payment of any debt and only the central bank could issue money.

    Conversion between the Q-coin and the yuan, if unchecked, would lead to dire economic consequences, warned Yang.

    "Virtual money" could disorder China's financial markets by taking the place of the legal tender as an "on-line medium of exchange", he said.

    As the Q-coin was issued by an enterprise, not the central bank,the supply was not subject to the country's monetary policy and could cause the policy to fail, said Yang.

    However, analysts believe the Q-coin is unlikely to enter into circulation because once it is made convertible with the yuan, Tencent would be exposed to great risks, especially if there is a malicious drawing.

    No company would run the risk just to become a "virtual central bank", said a commentary in the Shanghai Securities News.

    Yu said inflation occurred only when money supply exceeded the value of available goods and services, but "the supply of the Q-coin is based on the amount people purchase, which is unrelated to the country's financial system".

    The sales volume of "virtual money" are estimated at billions of yuan every year in China and growing at an annual average rate of 15 to 20 percent.

Tue, 04/16/2013 - 17:38 | 3458253 new game
new game's picture

i got a reverse merger for you...


Tue, 04/16/2013 - 17:20 | 3458179 slightlyskeptical
slightlyskeptical's picture

Yawn. If it cost you twice as much to do your business, then you probably shouldn't be in business in the first place.

Also if it was to be treated as just a commodity we would need no more mining because the present supply is adequate for centuries into the future.

Tue, 04/16/2013 - 17:27 | 3458214 boogerbently
boogerbently's picture

If we ALL have gold, it will have no value.

Tue, 04/16/2013 - 17:51 | 3458305 Lets_Eat_Ben
Lets_Eat_Ben's picture

gold represents finite resources, so your statement makes no sense. If we ALL had every resource we wanted there would be no need for barter and therfore no reason for money.

Is that what you meant?


Tue, 04/16/2013 - 17:57 | 3458318 toto
toto's picture

Same as dollars.

Tue, 04/16/2013 - 17:19 | 3458180 new game
new game's picture

just watching patiently as a refill of popcorn maybe needed.

thinking golden tanned girls may be a better vlaue at this point in time...

Tue, 04/16/2013 - 17:20 | 3458181 xtop23
xtop23's picture

Any more info, regarding the rumor, that the LBMA was in danger of imminent default?

Tue, 04/16/2013 - 17:29 | 3458224 Spitzer
Spitzer's picture


Who cares...

All this talk about COMEX, silver, GLD, manipulation is all noise to me. Even I have been caught up in this.

Why should anyone care what is going on in any gold market, paper or physical until something happens in the US and Japanese 33 year bubble bull markets ?

I still maintain as I said 2 years ago, that the onset of freegold happens when there is selling/trouble in the BOND markets mainly in the US and Japan.

$1000 dollar gold, $2000 gold , what is the difference ? I have paid close to both. As long as BOND prices keep rising and the FED can do no wrong, nothing matters. As long as BONDS are the premier store of value for shrimps and giants alike, long or short term, nothing matters.

Nothing matters in GLD, nothing matters at the coin dealers, nothing matters at the bullion banks, nothing matters at King World News et al.

This is like being in late 60's and early 70's yaking about the price of gold as it bounces between $35 and $60. It didn't matter if you bought at $35 or $80 then until there was trouble in the BOND market and it doesn't matter now as it bounces between $1000 and $2000 now.



Tue, 04/16/2013 - 17:45 | 3458285 Manthong
Manthong's picture

Yes, as long as the illusion of government being the guarantor of happiness and security persists and as long as confidence in bond value is maintained, the value of gold will be suppressed.

But that freegold notion will take considerable effort on the part of free men to overcome the efforts of government to confiscate it.

Tue, 04/16/2013 - 18:18 | 3458366 xtop23
xtop23's picture

I don't disagree.

I should think a failure to deliver the underlying asset on demand, and instead settling with fiat, would decrease investor confidence in such systems in general.

I also wonder why governments would utilize various mechanisms that impact the price of Gold, thereby bolstering their fiat valuations, if there wasn't a correlation between the bond market and precious metals.

If the above is true, it would seem to me they would be quite concerned of such an event.

Of course it could be irrelevent and simple greed on the part of the institutions involved.

That makes just as much sense as anything else.

What am I missing here?



Tue, 04/16/2013 - 19:26 | 3458412 Manthong
Manthong's picture

Here is the answer to your question.

I keep throwing this out there.. watch the whole thing but go to 15:30 for the crux..

It ain’t rocket science anymore.

Tue, 04/16/2013 - 22:57 | 3459278 xtop23
xtop23's picture

Thx for the clip on Capital Acct. I don't believe I ever saw that episode.

I guess my question is this;

If the bond market is what matters not the price of Gold, fiat is paid in lieu of physical metal to applicable parties, the physical market takes command of pricing the underlying asset and the Comex / LBMA blow up, wouldn't that be a significant indicator that control of metals pricing was was in danger of being lost?

Wouldn't that then be of more than passing interest, to anyone focusing on if and when the bond market might come under pressure?

Or is it basically just one of many pricing mechanisms utilized to control metals and until we see actual impact in the bond market, of minimal interest.

It would seem that we've moved passed the early rounds. Topics like the LBMA failing to deliver the physical asset are just talking points, and now we're waiting for the round 7 bell to find out if what occured the last 4 days actually matters.

Weird. I had always assumed that a default of physical delivery by the Comex / LBMA would immediately blow up the paper market and we'd be off to the races. Hence, my initial query, regarding whether or not the LBMA imminent default rumor had any legs.

Sorry, need to get my head around that. 

To quote Heinlen, "I'm only an egg."



Tue, 04/16/2013 - 20:08 | 3458786 sschu
sschu's picture

Yours is an awesome post and the message is both simple and obvious.  The detailed in depth analysis is a fools game as long as the 10 year treasury stays under/around 2%.

When rates start to increase and Bennie loses control, which he will eventually, then you better have some gold (the real stuff) because by then it will be too late.  Accumulate at any price until then.



Tue, 04/16/2013 - 17:34 | 3458187 Yen Cross
Yen Cross's picture

     Long shiney 'nuggets'  aka (rocks).   Nuff said.



Tue, 04/16/2013 - 17:26 | 3458198 Theta_Burn
Theta_Burn's picture

I don't know what scares me more, the crash in PM's or the reasons behind it.

Who/whats next? Japan? Euro? Korea? Iran? fuck...take your pick.

They got their spike head be damned..

Tue, 04/16/2013 - 17:32 | 3458238 new game
new game's picture

it is all too risky for my blood. flight to bonds and dollar will be the result.

not that this dirty shirt wants to be worn, but name a better place short term?

hate to say it, but cash is king for now, even if inflated slowly away.

frn's for now-95 % long (or short if you add inflation).

Tue, 04/16/2013 - 17:25 | 3458200 youngman
youngman's picture

I think we will know what happened in the next few weeks as numbers come out.....or don´t....if they don´t show up in some hedge funds numbers then it was a raid pure and simple....I watch the Comex very close...and it is losing metal pretty fast..if that picks up....i will go for the raid paper is way overscribed...but the metal is hard to come by and I think countries or entities are asking to take it home with them or at least move it to a new vault that they feel more comfortable with.....its moving now...and being bought up by Asians and Indians....a few of us Westerners are buying too..but still below 3% of the population...after this drop that will go to 2%....the raiders scared off a bunch......

Tue, 04/16/2013 - 17:25 | 3458201 razorthin
razorthin's picture

>= 1100 and the bull is intact.

Tue, 04/16/2013 - 17:27 | 3458206 pacu44
pacu44's picture

But you cant eat gold 

Tue, 04/16/2013 - 17:30 | 3458220 RSBriggs
RSBriggs's picture

Actually you can.  You just have to pound it really, really thin...

Tue, 04/16/2013 - 17:42 | 3458272 Yen Cross
Yen Cross's picture

  +1 RS Briggs. I have few bottles of this liquor in my guest house. Google Image Result for

Tue, 04/16/2013 - 17:43 | 3458274 adamas
adamas's picture

oh yes.... you eat it then shit gold


Tue, 04/16/2013 - 19:17 | 3458572 ozzz169
ozzz169's picture

When Japan was at the hieight of the boom, I had a professor tell story about how he was in japan dinning with some elitist and they bought him a dessert and they topped it with gold shavings (shaved a bar right at the table)  so you can eat it :)

Tue, 04/16/2013 - 20:13 | 3458799 Kirk2NCC1701
Kirk2NCC1701's picture

It turns out you can't eat most things in life.  Even those/who that matter that matter to you.

Tue, 04/16/2013 - 17:29 | 3458209 The Luftwaffe
The Luftwaffe's picture

Supply is Drying up


Two major events last week: 1) A Chilean court ordered Barrick Gold to halt development of its massive Pascua-Lama Gold and silver project.


2) There was a major land slide at Rio Tinto's Kennecott mine in Utah, which supply's 16 percent of US silver. The MSM has not made a peep about this


I think that these events are somehow related to the raid 

Tue, 04/16/2013 - 17:29 | 3458225 boogerbently
boogerbently's picture

Bad for miners, good for gold/silver.

Tue, 04/16/2013 - 17:31 | 3458232 Theta_Burn
Theta_Burn's picture

No dought supply is drying up, that and record demand suggests price should go down?

Something big is brewing

Tue, 04/16/2013 - 17:34 | 3458245 The Luftwaffe
The Luftwaffe's picture

We live in a house of banker installed mirrors

Tue, 04/16/2013 - 17:52 | 3458309 Temporalist
Temporalist's picture

Yes as Jim Grant called the markets a "hall of mirrors".  I like your visual though as I can see Schumer supervising the installation as he says to Beryankme "get to work".

Tue, 04/16/2013 - 20:16 | 3458812 Diogenes
Diogenes's picture

Saw a man with the jinx in the third degree
From trying to deal with people--people you can't see
Take away, take away, this house of mirrors
Give away, give away, all the souvenirs
We're all in the same boat ready to float off the edge of the world
The flat old world
The street is a sideshow from the peddler to the corner girl
Life is a carnival--it's in the book
Life is a carnival--take another look


The Band - Winterland - San Francisco - 1976


Tue, 04/16/2013 - 17:57 | 3458323 blindman
blindman's picture

in the new normal a supply decrease results in price decrease.
they claim demand is down because there is disruption in the supply chain
and there can be no identification of market manipulation for fun and
one thing is the actual physical market system is being harmed by
the paper pricing market, they are diverging or have diverging
interests and futures? when it comes down to it the holders of the
metal will have the law on their side, then the manipulators will
seek government intervention to steal the product outright from those
who suffered the manipulations to take possession. it will be a soft
edict, if that doesn't work then something else happens.
why people exchange metal for prices determined in the fraudulent
futures markets escapes me, yet price discovery has become impossible
as has been said everywhere repeatedly but bears repeating in this case.
it is all connected and tied to the fact that there are some who
refuse to live without the power to manipulate the larger systems and
other men at will and there is a special place for those people.
the question is what is the nature of that special place?
Force Majeure Was the End Game All Along, COMEX Will Default in the Next Week!
"The COMEX will default in the next week or several weeks and people will be “settled” with Dollars, no more metal will be delivered! So, knowing that “game over” has arrived, they are dumping a massive volume of paper contracts with impunity to push the metals prices as low as possible before the “default”. This way the “shorts” do not have to and will not be “covered” when “supply” cannot be obtained because of “an act of God”. They will be settled in cash (at a profit no less) because these “unforeseen” disruptions in supply. “Who could have seen it coming?” will be the mantra. I would suspect that banking stress and “bail ins” will also become prevalent globally. The pricing structure” will now push any and all physical sellers away from the markets and the “door” to safety is effectively being shut. Either you own metal or you don’t." s.d.

Tue, 04/16/2013 - 19:12 | 3458555 ozzz169
ozzz169's picture

How is supply drying up??  more is being used then mined????   gold is a bit unique as it is not destroyed or used in too many processes.  supply is reletive to price for a large degree... if price is higher then people think it should be they will sell off there gold, and increases supply. 

Tue, 04/16/2013 - 20:02 | 3458759 blindman
blindman's picture

supply is not drying up, supply chain mechanisms, pricing,
is being manipulated to a degree so as to disrupt the
physical distribution mechanism. the physical market is being
disrupted by that markets adherence to pricing determined
in fantasy land, the futures "market". it will end soon, imho.
as a result there maybe tiers of markets emerging and greater
premiums determined by characteristics of products, one might
think of it as greater numismatics?
it all relates back to the failure of fraud and illegitimate
assertion of power. that simple observation is money

Tue, 04/16/2013 - 22:05 | 3459171 jomama
jomama's picture

gee, i don't know Cleatus, you tell me why the fuck the dealer can't ship me what I ordered yesterday until who the fuck knows when?

go back to listening to your shitty Black Rain album.  i'd say that's more your speed.

Tue, 04/16/2013 - 17:29 | 3458219 jmac2013
jmac2013's picture

Interesting use of language Tyler.  Apparently, physical buying isn't "fundamental" support but technicals are?  Sounds rather Orwellian to me.

Tue, 04/16/2013 - 17:31 | 3458234 Yen Cross
Yen Cross's picture

   ? How many charts have been gifted in your direction?  Get some financial edmucaktion!

Tue, 04/16/2013 - 17:32 | 3458230 Poor Grogman
Poor Grogman's picture

Keynesians wish that gold was simply a commodity.

Gold will just not lie down and die, so it must be attacked at every opportunity by the high preists of Keynesianism.

Each win however is a little more difficult and costs more than the last one, the battles become more regular and more bitter.

Gold just sits there doing nothing. That is the key problem for the preists. If only it did something, it could be lumped with the other commodities and the discussion could move on.

How do you pretend something is a commodity while simultaneously hoarding it in your strongest vault, and refusing to audit it???

Tue, 04/16/2013 - 17:38 | 3458249 Dewey Cheatum Howe
Dewey Cheatum Howe's picture

And once the rest of the world that thinks otherwise buys as much as they can at discount, a full out coordinated retaliation by the likes of Russia, India, etc will happen forcing the price through the roof. You can bet on that. The rest of the world is not going to stand for it over a longer period of time.

Tue, 04/16/2013 - 19:02 | 3458508 ozzz169
ozzz169's picture

it is a just a commodity, one of its uses is storing value.  The value of gold was too high (why I have not bought any since 2008).  It needed to adjust.  By any objectionable standard it had run up too far too fast.  The fear mongering by gold pushers had been extremely high for years.  only been a couple times in history gold went that high, and eventually fell back to normal levels.  new normal is probably in 1000 range, but could easily see it fall back into the 800 range which would be much more in line with inflation (still out pacing it by a decent amount). 

Tue, 04/16/2013 - 17:36 | 3458250 1835jackson
1835jackson's picture

Don't fight the FED! Yes they suck balls and are almost 95% repsonsible for all the misery on this planet but you cannot fight this 5000lb bihatch. Just keep buying the yellow brick road. Oz will get his day.

Tue, 04/16/2013 - 17:39 | 3458261 new game
new game's picture

i would luv to fight the fed, but without that pesky ink pen...

Tue, 04/16/2013 - 17:45 | 3458277 Big Ben
Big Ben's picture

Cost of production isn't really a major factor in gold price over the short term because production is small (2%) compared to existing reserves. But cost of production is very relevant for gold miner stock prices. At $1100, high-cost miners have problems. And at $700, the high-cost miners would be history and even the low-cost miners would have big problems.

In the short term, psychology (greed and panic) rules. My plan is to just keep making regular purchases of physical. If we are very lucky, we may see gold go below $1000.

Tue, 04/16/2013 - 18:27 | 3458382 golden raccoon
golden raccoon's picture

Good comment!  This "research" piece is unbelievably misguided for a gold analyst.  My only disagreement with your view is I believe cost of production is no factor in the short term gold price, and if gold lost it's monetary value 100,000+ tons of physical would hit the market in short order, producing inventory levels of over 30 years of use, driving the gold price to trivial levels, and bankrupting every gold mine on the face of the earth.  Let us pray this never happens.

Tue, 04/16/2013 - 21:54 | 3459132 One eyed man
One eyed man's picture

About 50% of gold goes into jewelry. So even if investment demand for gold dried up, there would still be a strong demand for gold jewelry. Particularly in India and China.

Tue, 04/16/2013 - 17:50 | 3458304 apu123
apu123's picture

It might seem a bit paranoid, but I think the coordinated take down of gold and silver allows a lot of wall street players to pick it up on the cheap.  Another effect is the miners are getting slaugtered, maybe allowing for some of the same wall street players to pick the companies up on the cheap, buy some soon to be BK mining company assets or take some private.  Then they just walk the price per ounce up and control it like Debeers controls diamonds.

Tue, 04/16/2013 - 17:53 | 3458306 ServingMyKing
ServingMyKing's picture

Whatever happen with the US debt ceiling?  Did the sequester fix everything?

Tue, 04/16/2013 - 18:01 | 3458326 Temporalist
Temporalist's picture

The debt ceiling was raised in order to fill the bowl with even more koolaid.  Now get yourself a stein and start chugging.

Tue, 04/16/2013 - 18:23 | 3458372 ForWhomTheTollBuilds
ForWhomTheTollBuilds's picture

"Whatever happen with the US debt ceiling?"


There isn't one anymore.  Gotta admit, they licked that problem...



Tue, 04/16/2013 - 17:52 | 3458310 Grin Bagel
Grin Bagel's picture

OT, please forgive if required


Saludos cordiales.

Tue, 04/16/2013 - 17:54 | 3458313 Grin Bagel
Grin Bagel's picture

OT, please forgive if required


Saludos cordiales.

Tue, 04/16/2013 - 17:57 | 3458317 kragsquest
kragsquest's picture

Compared to?


Stock certificates?  Digital money?  Basic human needs, food, clothing, shelter, transportation, fuel?

Tue, 04/16/2013 - 17:59 | 3458327 Iam Yue2
Iam Yue2's picture

$330 An Ounce.

Tue, 04/16/2013 - 18:06 | 3458340 blindman
blindman's picture

gold oz.s will become so cheap that McDonald will
give them away with an order of fries, you heard it
here first. golden fries baby ! ^tm. even better ...
Precious Golden Fries, at Mcdonalds ! the new normal. ^tm.

Tue, 04/16/2013 - 18:00 | 3458328 buzzsaw99
buzzsaw99's picture

It reads like someone took an article about oil and changed a few words. Gold isn't oil, and the supply/demand function doesn't behave the same at all.

Tue, 04/16/2013 - 18:03 | 3458330 eddiebe
eddiebe's picture

The banksters won this one!

Tue, 04/16/2013 - 18:04 | 3458333 Cacete de Ouro
Cacete de Ouro's picture

As one of the 5 participants of the London gold price fixes (twice per day), and as a member of the LBMA and LPCML, and finally, having just opened a new London vault, then nothing that Barclays says about gold should be believed. Counter intuit active maybe, but when Barclays reveals its fix trade statistics, it's LPMCL clearing statistics, it's vault location, and its central bank and Vatican client gold trades, then I will start to read some analyst commentary such as plied by Suki Cooper....

Polly put the kettle on...Suki took it off again....

Say no more, say no more....:

Tue, 04/16/2013 - 18:04 | 3458336 Herdee
Herdee's picture

I bought a little more physical today at Kitco up in Canada here.I certainly don't see anything changing overnight with governments around the world printing(counterfeiting) money.Debt levels and entitlements along with demographics haven't changed.No,I'll take a gift when I get one.These prices are a give-a-way and if central banks around the world are in trouble by supporting their crooked politicians who are spending out of control and have to dump their gold,I only hope that I can get a deal on some of that for the long run picture.I'm sure that ordinary working Americans,East Indians,Chinese and lots of other folks around the globe feel the same way.That's what's putting pressure on the crooks.

Tue, 04/16/2013 - 18:12 | 3458352 pine_marten
pine_marten's picture

Gold is just a commodity - but women and dragons are fond of it.

Tue, 04/16/2013 - 20:25 | 3458813 Kirk2NCC1701
Kirk2NCC1701's picture

Especially women in India and China.  Even in the US, you'll see an unusually many Indians in PM shop -- given their demographic percentage of the population.

Ain't momma/Shiva happy, ain't nobody happy.

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