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Bloomberg: "Losing Faith in Gold From Ghana to Vancouver Proves Rout"

August 14, 2013

Bloomberg: "Losing Faith in Gold From Ghana to Vancouver Proves Rout"

By Peter Robison & Ekow Dontoh - Aug 13, 2013


IMO a good read. A few excerpts:

"Even seasoned forecasters say the metal’s future price is hard to predict, dictated more by sentiment than standard measures of supply and demand. Bulls point to the surge in jewelry buying and nine consecutive quarters of net buying from central banks, among them Russia and Kazakhstan. Bears contend the banks often buy at the wrong time -- adding 203 tons this year as prices dropped, for example, leaving them with $284 billion of losses on gold holdings of 31,910 metric tons through May, according to data from central banks compiled by the International Monetary Fund."

"The boom rippled out to as many as 60 million people around the world -- 10 million of them gold miners and 50 million others who sell them merchandise or services, said Kevin Telmer, executive director of the nonprofit Artisanal Gold Council in Victoria, Canada. People switching from farming could expand their earnings as much as fivefold, he said."

"[A gold mine promoter] went to London in April to raise money for his newest venture, a developer of Kazakhstan gold assets called IRG Exploration & Mining Inc. He met with eight analysts and bankers. Six weeks later, four of them had lost their jobs…"

"Vancouver is home to more than 700 mining companies scattered among high-rises framed against the stunning North Shore mountains. They’re often small, employing a handful of people who then hire auditors, engineers or helicopter pilots to reach remote sites. Many are struggling to survive. The median Vancouver mine exploration company has $325,000, enough to last less than five months, according to data compiled by Bloomberg."

"There were rows of empty seats at a Vancouver mining conference in May. Half as many exhibitors as a year before came, said conference organizer Joe Martin. “No Soliciting” signs were posted on tables to discourage salespeople who hadn’t paid from showing up anyway. In one hall, David Hodge, president of Zimtu Capital Corp., bellowed about an early-stage exploration company like a carnival barker."

"The metal is also weighing on returns at Utimco, the $29.2 billion fund for the University of Texas and Texas A&M University systems. Utimco began buying gold as a hedge against dollar devaluation in 2009 and by 2011 held more than 20 metric tons -- larger than Canada’s gold reserve -- in a New York warehouse."

"“The industry is not sustainable at $1,230 an ounce,” [Nick Holland, the CEO of Gold Fields Ltd] said June 27. “We’re going to need at least $1,500 an ounce to sustain this industry in any reasonable form.”

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