Why $1,100 is a Critical Price Level for Gold

posted in: Charts, Gold | 0

From Morgan Stanley:



“Output from operating mines and committed projects is set to fall by 450t to 2020, with over 50 mine closures from 2015-17 alone (Wood Mackenzie). There’s a long pipeline of projects totaling 580t of extra production capability to 2020. However, if the price falls and capex is cut, a significant portion of this expansion could come under threat. We estimate that up to a quarter of new mine projects need a gold price in excess of $1,100/oz to be economic, making delays and cancellations a growing risk.” 

Gold mine supply is at an interesting potential inflection point; additional downside to below $1,100/oz could shut down/delay a significant portion of projects due to come on-line in the coming years. This dynamic should continue to be supportive of gold prices as older operating mines enter the terminal phase of their mine life-cycle or shut down altogether.