Tectonic Metals gets funding for gold exploration in Alaska
The company's Flat gold project is located 40 km north of the giant Donlin gold project.
Fair is fair
On Tuesday gold stabilized but hovered near five-and-half year lows struck last week after a closely watched report showed global gold demand at the lowest in six years , followed by a prediction of a 30% fall from today’s levels.
Futures contracts in New York with August delivery dates were exchanging hands for $1,095.10 an ounce in after hours trade on Tuesday and flat compared to yesterday’s close in another day of light trading as anxious investors look for fresh direction for the metal.
A return to its recent dip below $1,180 would represent a 50% retracement of the metals 12-year bull run, but new analysis from Deutsche Bank predict a much greater decline than that.
“Gold would need to fall towards $750/oz to bring prices in real terms back towards long-run historical averages,” according to a new report from the investment bank quoted by Financial Review.
The Deutsche Bank analysis factors in world growth, the US dollar, money supply and central bank gold purchases with fair value calculated at $785 an ounce.
According to this model, the long-run average price adjusting for consumer inflation or CPI is $770 and when taking into account price appreciation at the factory gate (PPI) that figure falls to $725:
“We believe financial forces imply fresh lows in the gold price in the months ahead,” said the bank. “We believe the adjustment in US long term real yields and the US dollar is still incomplete and interest rate and dollar markets will continue to move higher heading into next year and beyond.”
Only falling oil prices could support gold as it could lead to defaults in the sector and delay the Federal Reserve hiking of interest rates:
“Not only could lower energy prices and US inflation delay Fed tightening but we are already seeing lower oil prices push US energy corporate bond spreads to their widest levels since the beginning of the year.
“The risk of a default cycle for US energy names and a broader credit event spilling onto US financial markets may provide some welcome support for the gold market.”
Deutsche Bank is the most bearish on gold, but is not the only investment bank predicting sharp losses ahead.
Chief commodity strategist at investment bank Goldman Sachs, Jeffrey Currie, who has been bearish on gold since 2012, sees gold heading below $1,000 an ounce, while in the annual gold forecast survey by the London Bullion Market Association of the 35 analysts polled, five predicted a dip below $1,000 in 2015.
Adam Myers of Credit Agricole was the most bearish with $950 as an average and a low point of $880.
Futures traders are also anticipating more weakness with so-called managed money investors such as hedge funds going short – placing bets that the gold price will decline – to the tune of 12.1m ounces or 340 tonnes, a new record high.
According to the Commodity Futures Trading Commission’s Commitment of Traders data for the week to July 21, large speculators now hold a net short position for the first time since at least 2006, when the data was first being tracked.
6 Comments
Altaf
When some commodity starts to fall, every one predicts more fall. As they assume people will not take them seriously, they come up with some historic mumbo jumbo to convince people that they are serious and they know too mch. Once it recovers and starts going up, every one starts to predict more upside.
Gold price will not depend on corrections to be made in gaps of charts. It depends on production, production cost, demand. The fact is 90% of all the gold has a production cost today of 1000 dollars per ounce is real.
If gold has to correct to 750 based on some calculations, the same people should do the calculation for Iron ore and coal also.
It will not work.
2ndOrion
Good news -if it’s for real for small investors. What with the amount of printed and computer manufactured money on the accounting books world-wide, this price will not last. It is best for small investors to get it while they can -if it does drop this low. They will be very happy later. Prices of anything do not stay low like one wants them to. They always rise.
Mekoya Wondrad
I agree with Altaf. Production of gold will stop if gold price goes below $1000 (this is the majority of the gold mins). Very few mines can survive at production cost of between $900 and $1000. If it is below $900, Then almost all mines will close and I don’t know from where you can buy gold at $750?? Be realistic. Cost will restrict output if margins are erased. Then demand will push the selling price above the cost of production.
groeg
I mean this is ridiculous.Now we know that a number of big Gold miners sell below cost(Harmony,Anglogold,Gold Fields,Newmont, Barrick. Sibanye) and a lot of other, smaller miners.How Long will a miner sell his Gold, making red figures with every ounce?In my life as a Manager and Marketing V.P. we usually stopped selling products making losses.I say the longer the Price falls, the better for the product Gold.Because in Gold we are really at PEAK GOLD.Production goes down like hell with Price ideas mentioned in this articlePeak Gold is not the same as Peak Oil.Oil can b found everywhere and new wells sprang up by the thousands.But tell me if there are new Goldmines and where they are.There are None.So Gold will flow slower and slower to the markets…and the effect will be higher sales. at one Moment or another. Think, Peak Gold ist here and at the same time costs becoming higher than sales Price per ounce.
PS.Tell me the Name of this mine that can make Profit at $700/oz.I will buy their Shares.
Chris Goodwin
Pretivm
Terje Gronlie
SLW currently buys at 400 per oz, and 4 silver. Their total price is higher as they have paid upfront, but above prices are locked in for LOM.