Gold mid-tiers’ Q3 2024 fundamentals
All-time-high gold prices combined with relatively-contained costs catapulted unit earnings to another epic record.
The most compelling argument for owning gold bullion I have ever heard…
A 63-year-old businessman went to a doctor complaining he had swallowed a bottle cap in anger after he had a fight with his wife. After a three-hour surgery, the doctors found 14 ounces of gold bullion in the man’s stomach. The police and Customs were called, and the gold recovered was confiscated. (Source: “Gold bars removed from Indian man’s stomach,” BBC News, April 18, 2014.)
This is just one of the many ways smugglers are bringing gold bullion into India. In this particular case, this man was willing to die for gold!
You see, the Indian government has imposed rigorous duties on importing gold bullion into the country. As a result, imports of gold bullion between May of 2013 and November fell more than 88%. In May of 2013, 162,000 kilograms (kg) of gold bullion was imported into India, and by November 2013, it had declined to 19,300 kg. (Source: Ibid.) As the government imposed its high duties, smuggling of the precious metal into the country increased. And as I just told you, people are risking their lives to get the yellow metal into the country.
To recap what I have been writing about gold bullion:
1) More and more central banks have been buying gold bullion to stabilize their reserves. For years, central banks sold their gold; now they are buying it back.
2) The decline in gold prices has forced gold miners to cut exploration projects for the simple reason that they need to conserve cash. Less exploration means less supply down the road. Also, there has been a focus on closing mines that are not profitable at $1,200-an-ounce gold.
3) China bought close to half of the world gold production in 2013. It’s appetite for the metal is insatiable. Countries like India, which I discussed earlier, have put measures in place to dampen demand for gold because its citizens want so much of it.
4) When Germany asked the U.S. for its gold back (the U.S. had been storing it for decades), it was told it would have to wait seven years to get it back!
While I can’t prove it, my suspicion is that there is an exponential amount of demand (paper-issued) against a shrinking amount of actual physical gold bullion outstanding.
But despite all this, gold prices remain depressed. Sure I have read the price manipulation stories. But to me, “why” is not as important as recognizing an opportunity when it presents itself.
I’m a strong believer in the “regression to the mean” theory. And that’s exactly what will happen to gold bullion; it will regress to its value…a value which is much higher than today’s price.
by Michael Lombardi, MBA
