Gold Drops Below Its Average Cash Cost

Tyler Durden's picture

As shown two months ago, the marginal cost of production of gold (90% percentile) in 2013 was estimated at $1300 including capex. Which means that as of a few days ago, gold is now trading well below not only the cash cost, but is rapidly approaching the marginal cash cost of $1104...



Which means that of the following mines (as we showed here) which make up the gold cost curve, one by one, starting on the right and going left, production is going to go dark, even without the recent demand by South African gold miner labor unions to have their wages doubled. Until eventually virtually no gold will be produced.



It is at that point where one must apply the New Normal supply and demand curve, when one can predict a $0 per ounce price for gold, as physical demand continues unabated, while actual physical, not paper, production has now started going offline.


Joking aside, not even Bernanke and all the paper Gold ETFs in the world will be able to do much to suppress gold prices from reaching their fair value when gold production hits a standstill, and when demands, especially by China, is still in the hundreds of tons each year.

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Dareconomics's picture


The gold rout continues.  Slowing world economic growth, taper talk and the lack inflation are the major culprits.  Gold will remain a poor investment for the immediate future, but it is still valuable as a disaster hedge.

greatbeard's picture

>> the lack inflation

Lack of inflation?  I'm guessing you don't run a mining operation, nor a household.  Go buy a bag of groceries and then tell me there's no inflation.  Got a cat or a dog you buy food for?  Eat canned fruit? Go to the doctor? No inflation?  Seriously?

Spastica Rex's picture

You're not applying hedonic adjustments properly.


Spider's picture

If you use all-in costs gold is bigtime negative now...

Not much gold going to be around next year - i'll buy mine now

DoChenRollingBearing's picture

The Central Bank of DoChenRollingBearing shares your view, and will be buying physical gold as funding permits.

ZerOhead's picture

Welcome to the final act of 'Voodoo Economics' the play about making lots of money.

In Act IV Scene II not only do deficits no longer matter... production costs now don't either.


"Let the Good Times Roll" until the wheels fall off...

disabledvet's picture

"start digging with your hands bitch. where's my money." move along.

The Shootist's picture

AG in a mind boggling 62% correction. Stawks -5%?

knukles's picture

Somebody around hereabouts used to say it only cost $5 to mine.
I hate this disinformation!

ZerOhead's picture

It costs less than $5 a barrel to lift light crude in many of the Persian Gulf states but that doesn't affect prices downward much does it?

There are producers who could profitably extract gold for $400 an ounce and there are producers who need $1,200 or more to produce profitably. There is also a lot of gold that is brought into being as a by-product of the production of some other base metal like copper.

The largest producing gold mine in the world, the Grasberg mine in Papua, Indonesia, is primarily a copper mine.[6]

I can imagine that a lot of the new production being brought on-line is of the $1,200 type... you know marginal projects that were sidelined for years until the prices were high enough to permit economic extraction... supply could get even uglier if copper prices ever plunge...

boogerbently's picture

If miners DOUBLE their price, what's the rest of the world going to do......not buy it ???

DaddyO's picture

Buy, Buy Buy!!!!

Went by the LCS today and they had nothing!!!!

Owner told me she got 3400oz of silver on Saturday and sold out yesterday.

What the heck does this mean? /sarc

Great buying opportunity, that's what it means...


The Shootist's picture

"If miners DOUBLE their price, what's the rest of the world going to do......not buy it ???"
You forget, unlike OPEC, an organization that supports profits for members, the World Gold Counceil enacts "Brown's Bottom" type moves constanly in trying to destroy the industry. (Their infiltrated by paper pushers.)

Supernova Born's picture


Luca Brasi sleeps with the fishes.

NewThor is correct. It is going to take an apocalyptic event for gold to achieve actual price discovery.

Manthong's picture

M F freakin crap..

go price a Rolex President to figure it out.

The Navigator's picture

Same story here in SoCal DaddyO

Went to my LCS yesterday, no silver - but they had some 30 Morgans/Peace clunkers - I bought 15 @ $22/each.

Great buying opportunity if inventory can be found.

CPL's picture

They tripled it actually.



old naughty's picture

b,b...but China has so many AU mines thay can come on stream, no?


CPL's picture

Considering China has been mining them for 3500 years, only way they are getting anything out of them if they are pulling a BreX and shoveling coins down the hole at market cost.


Definition of a liar, man standing over an empty hole telling you something valuable is down there.  Works in oil and mining for some unknown reason.

Dugald's picture

400 to 1200 is right on the moeny.....a chum recently discovered a deposit in

Victoria (Oz) which was promptly snapped up by the chopstick jockeys....

disabledvet's picture

"King Dollar" isn't the only currency out there. i do agree "where is the deflation?" but gold...let alone silver...doesn't collapse in price as they have "because inflation is imminent." the precious only does this because FALLING prices are imminent. the "math" simple enough: "i can think of a lot of things less valuable than gold." here's some interesting math to make you go "hmmmmm": this is the "middle of the driving season" folks. guess what...Americans have stayed home. "and this is the second month in a row for this type of build." these are MASSIVE numbers and even MORE massive "missed estimates." believe somebody is massively long this b.s. AND THEY'RE DEAD AND THEY KNOW IT.

Lore's picture

No jobs = No commuters = Vehicles sitting in garages with full tanks of gas.  At least the "greens" will be happy.  Economic collapse is a marvelous way to "get people get out of their cars."

HardAssets's picture

Depending how you draw the charts, Ag has retraced about as much as in 2008. Its too early to predict anything with any degree of confidence at this time. That said, Ag made a pretty dramatic move back up after the 2008 crash.

Kirk2NCC1701's picture

PLEASE, dear Jesus, show us that you love the Common Man. 

Give us gold at $100/oz.  And Silver at $5.


illyia's picture

Okay. But you will have to trust my I.O.U.


gmrpeabody's picture

Be careful what you ask for...

disabledvet's picture

kerosene used to be hopelessly dear "back in the day." after if displaced whale oil (think the book Moby Dick) it was not long thereafter that it too was replaced by electricity and distillates made from "crude oil." where at one of those inflection points right now...where oil is the new kerosene. a more ancient example is salt..."and the great salt roads" that still exist today in europe and elsewhere. needless to say if you showed someone from even 100 years ago "table salt" they'd be flabbergasted. simply put the human race will never run out of salt. it will never run out of oil. it will never run out food. it will run out of money however...we always do.

fomcy's picture

Cash Costs at Crimex still Alright, Nothing to worry about, just print and sell
Why bother to mine? close the mine and if you need GOLD spend mining expenses shopping at Crimex -
Still the FED's most profitable mine around. "We print GOLD future contrast all the time" Zero expenses.

Whiner's picture

Then Peter said, Silver and gold have I none; but such as I have give I thee: In the name of Jesus Christ of Nazareth rise up and walk.

howenlink's picture

Pretty sure that wasn't Peter Schiff.

merizobeach's picture

The Schiff isn't fiction, either--another big difference.

CPL's picture

I'll write you an IOU on that 'forthcoming' bar of silver and gold.


And yes...the truck is backed up.  Nobody has anything on hand or expecting delivery anytime soon.  Water, water everywhere and not a drop to drink.

Panafrican Funktron Robot's picture

Didn't see this posted anywhere else, but it's worth noting that today is metals futures opex.

ZerOhead's picture

OK there's the MOTIVE... now let's see what's left... oh right OPPORTUNITY and ALIBI... hmmm....

Car 54 Where Are U's picture

I have a small US miner that sells 1-10 Troy oz bars, assay certified, numbered, 99.95% pure at 5% BELOW spot to finance opening his other concessions. His refiner will purchase back at 1% below spot. Give me a shout and I'll hook you up.

General Decline's picture

Darn. This is bad timing. I just sent my last dollar to a Nigerian prince.

HulkHogan's picture

My mom's cousin-in-law makes $1697 an hour from her computer. Click here to find out how @

THX 1178's picture

Your mom cries like a little bitch when I bend your dad over the couch and put the fuckin D in him.

Charles Nelson Reilly's picture

Whoa.... You sure you got the right forum?

Temporalist's picture

And why the restraint on the "D" instead of...whatever?  Like the rest of the comment wasn't profane.

Jack Napier's picture

Just a pinch, dare I say, a touch of class.

OpenThePodBayDoorHAL's picture

Let's see, D...D...D...Digit? Davenport? Dentures? D-9?

howenlink's picture

I think he meant D as in golD.  Just didn't want to say it.

Lore's picture

Velvet Jones School of Technology

"make 1500 dollars without leaving the conforts of you own bedroom"

Dave Thomas's picture

When Charles Nelson Riley gets upset about a Dad rape montage you know you've gone too damn far.

HardAssets's picture

The big question is what will happen if the Chinese economy completely crashes ?  There are those who say they have a terrible real estate bubble. Does gold crash in that scenario, or do more people over there go to it as a refuge ?  Hmmmmm . . . . we live in very 'interesting' times.