Wednesday, February 21, 2018

Perfect storm brewing for gold as production continues to fall at a time when investors will soon be looking for safe havens

Last month we published an article surmising that the gold industry may have crossed the Rubicon when it comes to mining output.  And now just one month later, expectations for gold production appears to be getting even worse which is setting up a perfect storm for gold prices since investors may soon be dumping financial assets for reliable safe havens.

The gold market is setting up for a perfect storm as the top mining producers’ supply is forecasted to decline right when demand is likely to surge.  The surge in gold demand will occur as the broader stock markets roll over and begin their inevitable massive correction.  Due to the tremendous amount of leverage in the system, the coming market correction will be quite violent at times.  If investors believe the correction is over, and high times are here again, then they haven’t learned anything about the cyclical nature of markets. – SRS Rocco
And this additional analysis comes from Rick Mills.
I’m sometimes reluctant to talk about gold as a commodity, since so much of the gold market is driven by investment, but there are some interesting things happening that makes this a very good time to consider an investment in gold or gold stocks. 
Simply put, the world is running out of gold, especially the stuff that’s high grade and easy to find, and this makes me bullish on the precious metal – irrespective of all the familiar demand factors like safe haven, inflation hedge and store of value.
South African gold production has plummeted below 250 tonnes compared to 1,000 tonnes in the 1970s, and in China, the only country to increase production in recent years, it fell in 2017 by 9%
This has many industry observers talking about “peak gold”. A Thomson Reuters report said 2016 was the first year since 2008 that gold mine output actually fell – by 22 tonnes or 3%. World Gold Council chair Randall Oliphant agreed that the world may already have produced the most gold in a year that it ever will. He predicted gold prices to move as high as $1,400 an ounce in 2018. “Production is likely to plateau at best, before slowly declining as demand rises…” Bloomberg quoted him saying in September. 
As for new gold mines, the bear market of 2012 to 2016 meant most large gold companies slashed exploration budgets and small explorers had an extremely tough time raising cash. – Silver Doctors
“This is a perfect storm that will cause much higher gold prices for investors who are wise enough to see it.” - Steve St. Angelo


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