Following on from my last piece about the current collapse in gold and gold mining stocks, this is starting to look more and more like a capitulation event. And as we all know, for a market truly to bottom it first needs to capitulate.
To recap what I wrote yesterday, I believe that the market for gold is going through a fundamental change. Gold itself is fast transforming from a crisis trade, in anticipation of the financial system collapsing or blowing up in a hyperinflationary boom, to a fundamental play supported by the true cost of production. An investment company, called Hebba Investments, has been publishing a series of research reports on Seeking Alpha for the last few years. They have developed a model to calculate the all-in production costs of the world’s largest listed miners. In their latest note they estimated that the average all-in production costs for these companies (accounting for more than 25% of the world’s supply) were $1,221.75/oz during Q3 2013.
At this very moment gold trades at $1,215/oz.
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