Industrial Insight

Gold like copper and oil lacks the capital equipment infrastructure leading to higher prices. | November 11, 2010

http://www.fundstrategy.co.uk/features/cover-stories/golden-wonder/1021472.article

Golden wonder

8 November 2010 | By Tomas Hirst

Golden wonder

8 November 2010 | By Tomas Hirst

Supporters of the view that production fundamentals are driving the price can point to the fact that production of gold peaked in 2001 at 2,604 tonnes or 83.7m ounces. A basic understanding of supply/demand fundamentals would suggest that any fall in the supply of a commodity should result in an increase in price.
Adding to the fundamental case, there is strong evidence for chronic underinvestment in the industry over recent years, fuelled in the most part by the increasing cost of production. With so-called soft targets largely exhausted, miners are having to either drill deeper or move operations outside traditionally safe environments in search of new supply. Both scenarios entail significant additional cost.

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About author

I'm the executive vice president for a steel casting trade association, the Steel Founders' Society of America. I've got a crazy wife, five crazy children, three crazy people that married into the family, and two crazy fun little grandsons.

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