RE:RE:RE:RE:RE:Dollar index is getting close to its previous peakCouple of points on this thread:
Firstly, unfortunately, it is not true to say that lower gold prices mean lower production, in the short -term. On the contrary, many miners will look to compensate for the lower gold price by increasing production, thus lowering AISC. EDV is itself doing that. Bear in mind that China is now the world's largest gold producer (as well as a key source of demand). An easy way to increase production is to focus on mining higher grade resources - which is, in effect, borrowing future production to keep a ine alive today. I understand that is what many smaller Chinese miners are doing currently.
Of course, this cannot go on forever, and eventually lack of investment means that production will start to diminsh - but that process could take a few years, and is what leads to a classic mining cycle.
Secondly, I don't think Japan is the only source of instability which could lead to a desire to own gold. The Eurozone has only held together because the market has believed Draghi's statement that he'll "do whatever it takes" to stop Eurozone bonds from collapsing (yields exploding). So far the market hasn't tested that promise. I believe it is an empty promise, because strict EU rules regarding monetisation of debt and the German constitution/attitude would prevent him from keeping it. If the market actually tests that promise (and I note that there has been recent nervousness regarding Greek and Portuguese bonds), the emperor may be seen to be wearning no clothes - and then all hell would break loose, probably leading to a break up of the Euro. The consequences for markets generally would be dire (short term), but it would be likely to put a rocket under demand for gold.
Cheers,
Mark