Gold after trump wins
Gold’s earlier big down days helped fuel fears another Trump administration is bearish for gold.
Iron ore producers and investors aren’t the only ones getting hurt by the continuing weakness in the iron ore price.
Western Australia, which contains the Pilbara iron ore region that has been a powerhouse of economic growth for Australia for decades, will see $13 billion less in royalties over the next four years as a result of low iron ore prices, which last week fell to levels not seen since 2008 – $46.70 a tonne at the Chinese port of Tianjing. The state’s Treasurer, Mike Nathan, also proclaimed the dismal iron ore price has finally reached the doorstep of the state legislature, telling The Sunday Times the price will “punch a $3.6 billion hole in the 2015-16 Budget alone,” Perth Now reported.
The state is already facing a $1.6 billion deficit this year and Treasury officials are worried it could balloon to $2.5 billion, according to Perth Now. The WA government is also pressing for an end to a three-year lag currently in place for calculating mining royalties the Goods and Services Tax, which penalizes states that rely on volatile resource revenues.
Meanwhile the Reserve Bank of Australia is expected to levy another rate cut this coming week aimed at lowering the value of the Australian dollar. The move would make Australian exports priced in US dollars, such as iron ore and coal, more competitive. The markets are betting the RBA will follow-up a February easing of interest rates with another quarter-point cut to 2 percent, an all-time low, Reuters reported.
The reversal of fortune must come as a bitter pill to swallow for Western Australia, which two years ago attracted $20-billion in investments from resource giants like BHP Billiton (NYSE, ASX:BHP), Rio Tinto (NYSE, LON, ASX:RIO) and Fortescue Metals Group (ASX:FMG) as they ramped up production from the iron-ore rich Pilbara to capture prices hovering around $120 a tonne. The state also derives significant revenues from gold-mining. To cope with the iron ore plunge, Western Australia has said it will reduce wages paid to government workers. Replacement workers on government projects will be paid 60 percent of their predecessors, a measure that will save around A$1.3 billion, the Wall Street Journal said last December.
The price collapse has resulted from a perfect storm of oversupply and shrinking demand from key consumers.
Steel consumption in China which imports more than 70% of the world’s iron ore fell last year for the first time since 1995 and the slowdown has coincided with a flood of new supply.
Led by the Big 4 – Vale (NYSE:VALE), Rio Tinto, BHP Billiton and Fortescue Metals Group – iron ore miners invested north of $100 billion in new projects and expansions since the start of the decade which pushed the market into surplus late 2013.
After giving up 47% in 2014, the price of iron ore is now down more than a third in value this year.
4 Comments
NorthAfricanMiner
I recall someone saying that:”Caring for the economy starts at home” against statements that oversupplying hurts Africa…………
allritejack
Parkinson’s Law for economics perhaps features. Why do governments plan to spend everything they budget for instead of investing the money in the good times. That way the economy would remain stable. Instead socialism comes out of the woodwork, benefits are increased for votes, then in the inevitable downturn they go into debt. If businesses ran like governments every country would end in poverty.
RUSS
Hi!, Patrons Of Mining.com Et. Al.:
Sense silver is largely mined as a byproduct of base metals mining, will this situation have a dramatic impact on the price of silver going forward or not does anyone know? This article evidences that gold was also being mined along with iron but nothing is stated regards silver being mined too so does that mean we should take it for granted that there is NO silver involved at all in these mining districts slowing down? Even so, if the amount of gold mined diminishes placing any upward thrust in gold’s price due to accrued shortages from these mining districts, sister silver should be impacted accordingly anyway regardless? Ultimately sister silvers price will let us know what we need to know, in order to understand more about these outstanding causes and effects taking place in price due to the overall mining picture production of supplies vs. demand. Maybe a price rise in sister silver will awaken the sleeping giant North American commodities community to the undervalued prices of both gold and silver giving us a higher range floor on their price structures by the end of this year? Every excuse has been given in order to debase the prices of OUR precious metals at times even below the costs of various miners’ basic costs of production and that invalid assessment needs to be eliminated in equating the true, sustainable prices required to keep every viable miner alive and functioning in todays very harsh precious metals mining environment in my opinion but is the precious metals community truly listening with leadership capabilities? Where, for example, are the giant institutional investors who should be able to assess undervalued assets against the backdrop of TRUE value in those assets and when do they take affirmative, proactive participation in asserting those values to the precious metals markets in behalf of their taking primary positioning at these too low prices is my biggest question today? How long can such lethargy hold out against the true assessments of real value investing so obvious that what other catalysts are needed to spark the interests of value investors? Is it that they think they can capture the exact bottoms which may or may not have been already formed and it isn’t good enough to know that governments worldwide are using QE type economic maneuverings to stimulate their deflating economies back into inflation mode? What else do we need to know, in order to see the TRUE value of gold and silver assets that have outlived paper money for more than 5,000 years of historical economic fiat destruction?
RUSS SMITH, CA. (One Of Our Broke, Fiat Money Corrupt States)
[email protected]
shadow01
whats the outlook for rio tinto s mine in labrador