Rocks to Riches with Thomas Schuster

The Gold Report: Thomas, the price of gold sank in October even as the stock market was rebounding. Can gold also rebound?

Thomas Schuster: Gold will rebound, it always has and always will. The mining market is almost violently cyclic. Deep lows are followed by spectacular highs. The tough question is when will the gold price rebound happen? There are a lot of nay-saying precious metal bears in the market right now. Many forecasters are predicting that gold will continue to trade within a narrow range around $1,1001,225/ounce ($1,1001,225/oz) over the next few years.

"Integra Gold Corp.'s project looks very promising."

But the fact is, on a global scale, we are not replacing reserves as fast as we're mining them. That simple fact supports only one outcome: higher prices. A recent report on gold production by SNL Metals Mining observes that when we look at the amount of potential future production from major discoveries made over the last 15 years, we could only replace, at best, 50% of gold produced during that same period. The report also points out that the average time to bring a newly discovered mine into production has been significantly increasing. For mines that went into production between 1985 and 1995, the average wait was eight years from discovery to production. For mines that went into production between 2006 and 2013, the average wait is 18 years.

There are many reasons for this more details are needed in feasibility work-ups, there are more stringent social and environmental standards, and more demanding permitting processes. Many of these mines are of lower grade. They are more remote, and require lots of capital for developing infrastructure and processing capacities. The capital market is poor at the moment; it is difficult to raise money and it takes more time to move into production than it did before.

TGR: Why was gold so high previously and what happened to the price, in your opinion? Why was it so high, and why did it fall so far? Continue reading "Rocks to Riches with Thomas Schuster"

Three Reasons Why Gold and Gold Stocks Will Rise

The Gold Report: Over two days, July 14 and 15, the price of gold fell over $40 per ounce ($40/oz), more than 3% of its value. To what do you attribute this drop?

Jeffrey Mosseri: I don't think it was a very extraordinary event. Gold has been trading around $1,300/oz. We see sharp upward and downward movements triggered by, for instance, something Federal Reserve Chair Janet Yellen said or a negative report by Goldman Sachs. It looks as if gold will stay in the $1,300/oz range for a little while. We'll see which way it breaks out. We believe it's going to break out on the upside.

Douglass Loud: Gold had been running up for a while, and every so often investors want to take some money off the table.

TGR: How high do you believe gold will go?

"We like North American Nickel Inc.'s Maniitsoq nickel sulfide project in Greenland."

JM: The average sustaining cost of production for gold is about $1,500/oz. If gold continues to trade below that level, at some point no new mines will be brought on. Supply and demand indicates higher prices for gold. At the same time, we're dealing with a seasonal trading pattern. Usually the position for those commodities tightens up around September/October. We think this will happen again this year. Higher prices? Yes. How much higher? We don't know.

TGR: Given that the financing for junior gold companies collapsed years ago, shouldn't the concomitant shortage of new supply have led already to higher prices? Continue reading "Three Reasons Why Gold and Gold Stocks Will Rise"