Drop in Gold Output Expected as Mining Companies Lose Money
With many mining companies in the red, analysts expect gold production to drop for the first time since 2008.
According to a Bloomberg report, the anticipated drop in production follows a global surge. Gold output jumped 24% in a decade to a record 3,114 metric tons in 2014, according to data from industry researcher GFMS.
About 10 percent of the world’s mines are losing money, according to London-based researcher Metals Focus Ltd. Output will start declining as soon as next year, said the chief executive officers at Randgold Resources Ltd. and Polymetal International Plc. Gold Fields Ltd.’s CEO expects a ‘big dip’ from about 2018, while HSBC Holdings Plc predicted the drop will be 25 tons this year.”
Approximately 65% of mined and recycled bullion is used in jewelry and industrial items. Investors buy the rest.
According to James Sutton, a portfolio manager at JPMorgan Chase & Co.’s $2 billion Natural Resources Fund, on average, the industry needs about $1,200 per ounce to break even, taking into account all costs.
Profit margins for the 15 largest producers have dropped as much as 45% since 2011, while their debt has doubled to about $34.7 billion, according to an analysis by Bloomberg Intelligence.
Barrick Gold Corp. ranks as the world’s largest gold producer. In August, Moody’s Investors Service cut the company’s credit rating to one level above junk status. Moody analysts say they expect Barrick to restrict output in the next two years.
The drop in output will likely shrink the implied gold surplus, a measure of mine output and recycling against demand from jewelers, manufacturers and investors. According to Barclays Plc., the implied surplus will drop to 999 tons in 2016, the lowest level since 2012, after reaching 1,476 tons in 2013.
Johannesburg-based Gold Fields CEO didn’t mince words when discussing the future gold supply.
Exploration has been slashed; projects have been put on the back burner. The gold industry supply side is going to drop.”
The likely drop in gold output is just one of many reasons now is the time to consider buying gold. For more information and in-depth analysis on the gold market, get Peter Schiff’s report Why Buy Gold Now? You can download it for free HERE.
Get Peter Schiff’s most important Gold headlines once per week – click here – for a free subscription to his exclusive weekly email updates.
Interested in learning more about physical gold and silver?
Call 1-888-GOLD-160 and speak with a Precious Metals Specialist today!
Related Posts
Made in America: The Dark Forces Promoting American Manufacturing
Whenever an election year rolls around, domestic manufacturing becomes a more central theme of discussion. Candidates from both sides, who seem to disagree on almost everything else, never waver in their commitment to auto manufacturers in Detroit and the steel industry. Republicans and Democrats never forget to remind the American public that they will try […]If 10-Year Yields Surpass 5%, Say Hello to QE (and Massive Inflation)
The wizards at the Fed and US Treasury have been forced to acknowledge that their “transitory,” inflation is, in fact, quite “sticky.” And with the inflation elephant now acknowledged by the circus of high finance, Treasury yields keep inching up, recently reaching 4.7% — the highest since November. The Fed is stuck: It needs to raise interest rates to tame inflation and […]California’s New Minimum Wage: A Cure that Exacerbates the Sickness
The solution to a problem shouldn’t make the problem worse. But apparently, California’s policy makers missed that memo. On April 1st, the state instituted a $20 minimum wage for fast food workers, the highest in the US. With California’s absurdly high cost of living, the policy appeared to make life more manageable for low-income residents. Unfortunately, as the adage goes, “If it sounds too […]$5 Wrench Attack: Bitcoin vs Gold in a Real Collapse
The monetary battle of the 20th century was gold vs. fiat. But the monetary battle of the 21st century will be gold vs. bitcoin. With Wall Street jumping into the game with bitcoin ETFs, a bitcoin halving recently splitting the block reward for miners in half, and both gold and bitcoin hovering near their all-time highs, it’s a great time for […]How Nvidia Uses Gold
What is Nvidia? If you’re a committed gamer the question may sound like nonsense. Nvidia, which was founded in 1993, is a tech company that makes GPUs and other products. It originally specialized in making products for the video game industry, that assisted in 3D rendering. If you were a committed gamer, you probably owned their products. If you weren’t, you might not have heard of them.
Leave a Reply