Bought some GLD ETF today.
I remembered 2-3 years ago, I read the production cost of gold is USD $1300. I got a surprise to see gold at such low.(Less than USD $1100)
I look up the internet and realized the top 10 gold miners/ producers are having AISC close to or even above current gold prices.
There are also plenty of debate about the adequacy of AISC (all in sustaining cost) and the actual cost should be higher.
But lets just take AISC, a metric develop by world gold council to account for the realistic costs of production, at face value.
At USD $1200 per ounce, there are already plenty of news article a year ago saying that some miners will not be able to sustain production.
I took a brief look at the various presentations of Barrick, Newmount and Sabanye Gold, and notice that ASIC is falling since 2012, and I believe that is due to reduction in exploration capex, although I am not sure if all companies include this exploration capex under sustaining capex.
We are defintely not near the peak of the gold cycle, but the trough or how long the low will lasts is everybody guess.
I remember during crisis period, gold price is exploding, so I bought some as a hedge.
An article that I read pointed out that Gold Bear Market is extremely long while gold bull is short. In fact, there are many articles (Just google "gold investment") that ask people to stay out and let the low take it course.
Also Warren Buffet has a very low opinion of Gold as an investment
Nonetheless, as major currencies are all fiat currencies, and a roaming currency tension brewing, I hardly think Gold will lose it relevance soon.
I wonder why all the emphasizes are on the low oil price but no one really give a hoot about gold.
Gold ETF pays no dividends too.