The Big Squeeze in Gold So my description of the gold market is this. ...
The price is supressed to hide REAL inflation rates.
Major Gold mining companies profit margins are being pressured because of this. Barrick gold all in cost per ounce. 1300$/ounce. All time high. And climbing. Why is this??? Let's explore.
Human effort to extract the metal hasn't changed much in the last 2000 years. Mining companies are desperate for profit. So they dont pay their workers (slaves) properly. Why is there violence in Africa now? Because the company is chosing to undercut their workers in order to make a profit. More proof of price supression in gold. If the price was fair (2500-3000$) The company could mine and pay their workers fairly. And by fairly I mean just enough that they dont go on strike and riot.
Junior Gold miners are getting crushed cause they can't even get their projects online. They are not feasible at these hstorically high but supressed levels. This is how you know the price is supressed. And that inflation is much higher then governments report. Isn't it ironic that the metal that is supposed to be an inflation hedge is uneconomical to mine because of high inflation??? The human effort has always been the same to get gold. It takes alot of effort, And now the gold is deeper and in lower concentrates. And companies cant make money with the start up cost. Its a losing project. High inflation and harder to get to , and lower grades.
So what does this all mean? Demand will win over supply for years to come until gold hits 2500$/ounce to make these billion dollar startup investments on the juniors feasible. At wich point you may meet demand with new supply wich will slow down the market. If the price goes up 100$/ounce and is supressed the governement will kill new supply to such an extent that the price will take off anyways. Cause the supply will not keep up with demand.
Inflation rates are going up at about 7% a year. Once all this printed money hits the open market and money velocity takes off... Watch out. 7% is bad. But how's 15%? 20% inflation???? Either the price of gold is allowed to go up by the free markets or the new mining supply with the manipulated price is so uneconomical that no one will mine it. So that is how the free market always wins long term. And the last question is how long will gold lag behind real inflation??? IMO not very long. And when the world and free markets all understand this there will be an overshoot on the gold side. Just as all pendulams swing back to reveal the opressed truth. I know why the government is doing this. I would too if I was them. The whole ponzi scheme depends on this. And fiat money depends on this. Just my opinion. Sorry so long.
I also believe that Utilities and booze companies could be a truer inflation hedge in the near term. Diversify a bit. Just in case the governements make gold and silver ilegal to own. Try and picture a world where the whole ponzi scheme comes crashing down. Inflation demon is obvious. USA bonds are all being bought by fed. Interest rates start to creep up. These are the real econmic forces at work in the world. Europe is only a sideshow. They are screwed cause they cant print money. It's a farce of the grandest order on the world stage. The banks have become the junk debt holders in order to keep it moving. Weekend at Bernies comes to mind. LTRO, EU Bailout funds, Troika, Merkel, Barosso, All infamous baffoons or institutions. Trying to put Humpty Dumpty together again. Gold, Silver, Utilities, Booze. Could shield you from government stupidity if free markets are allowed to work. IMO. But what do I know. Im just one guy. I could be totally full of cr#$. This is just my take on what is happening in the world. Now I go out. Have a beer or 3. Sandstorm Gold is still a nice place to be in all this uneasiness. Best place in the mining sector. Maybe even better then Gold bullion itself. GLTA