When I worked in Kyrgyzstan in 1998, gold was about $294 an ounce.
A gentleman in the mining business explained how market value at the time was below the mining cost, so he expected the price to go up substaintially which it did. I only bought a small amount of Coeur d’Alene. Coeur is now trading at a fraction of the 1998 price in spite of the price of gold.
Kumtor had a major mine in Kgrgyzstan at the time. The BA flight to London would transport the gold twice a week with the miners. I took that flight with the US Ambassador shortly after the Al qaeda strikes on Kenya and Tanzania.
As we were doing business in Northern Afganistan at the time, I offered her any assistance or connections but there wasn’t any follow up. In jest we even thought of naming a cigarette “Bin Laden lights”. But I digress.
Gold mining is expensive, in 2019, the cost of mining at some of the leading mines (Gold Fields) in about $900 so that is likely a floor. Capex for new gold mines is down significantly since 2009 which may provide some additional support, but the key long term driver will be mining cost. As such longer term, gold will probably not perform as well as the past 20 years. That being said, the capex commitment is riskier today as fewer new projects look as appealing:
“We think we have already entered the era of “peak gold” and there is very little that gold miners can do to change it,” he told DW. “At $2,000 per ounce gold, CFRA thinks it opens up new exploration frontiers, but most miners would need to see a sustained higher price to commit capital to higher-cost projects and therefore, we are unlikely to see a significant increase in exploration success.”
