The World Gold Council is of the opinion that if gold dips below $1,200 per ounce for a sustained period, serious production cutbacks are likely. The warning came earlier this week amidst the concerns which are being shared by investors worldwide. In its statement the organization said that the average industry cost of production is $1,200 per ounce.
In its 2014 outlook, the World Gold Council says that about 30 percent of the gold mining industry becomes unprofitable if prices fall below that threshold and in such a situation massive capital writedowns from 2013, from the world’s largest gold miner Barrick Gold Corp. among others, could also impair future production for some miners.
However, the World Gold Council declined to specify exactly how long prices could stay below $1,200 per ounce before significant production cutbacks appeared. It is evident that the lower gold prices which have been a major concern for the sellers have been a boon for some countries that have been known for hording the yellow metal.
Lower Gold Prices Discouraging Heavy Cost Involving Gold Mining
The World Gold Council also admits that more modest production from gold miners amid heavy expenses is not a new trend and this is on expected lines. The body admits that the mining industry, as of last year, is already selling assets and writing down capital. Nevertheless, the organization is keeping the lower threshold of $1,200 per ounce after a lot of considerations and deliberations.
In its report the World Gold Council revealed that mining capital and operating budgets soared in the past decade as gold prices sailed to a peak of $1,920 per ounce on September 2011. However, thereafter there have been a steep fall in the gold prices and a lot of efforts have been on reducing the cost. Also, declining scrap or recycled gold supply is causing huge trouble for gold miners.
Gold Analysts and Investors Bullish
ForexMinute earlier last month reported that despite gold biting the dust the last year, some analysts are the most bullish about gold prices this year. They speculate that after the biggest plunge in prices since 1981, gold prices may go up as demand may grow from India and China. Earlier, the worst performance of the yellow metal was seen in 2013 as it fell to the levels that were seen only three decades ago.
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