Replies to post #952 on The Rising Influence of Rising Affluence

[OakesCS]

but is every oz available for re-use?

John,
no, but a very large percentage is and it is occupying expensive floor space in a few large banks in places like Manhattan. I'd bet those large banks don't own much of that gold because the value of the gold is probably negative after extracting the floor space cost, cost of the vault infrastructure, and the salaries of all the personnel associated with guarding and accounting for the gold. It makes much more sense to charge rent to folks who think there is value in gold. Gold 'investing' is a 'bigger fool' game that persists because of history and a huge and every growing population of fools. (But don't get me wrong; I think gold is a very interesting metal and i've spent a decent amount of time pecking around looking for it).

you may have it backward when you say "the company could be profitable even w/o gold production", however, this is something that changes from year to year in a single mine (i.e. mining copper from many 'copper mines' would not be profitable w/o gold extraction). In anycase, the economics of a mine are evaluated as a whole - not on a specific metal being extracted from the ore.

As for production as a function of time: as i said previously, there has been consolidation. Miners are getting much smarter than they've been in the past. They aren't in the position of De Beers circa 1970 but they certainly understand that restricting supply can help their profitability. Of course, supply restriction is getting help from environmental regulations in some of the bigger metal mining countries in the world. Political instability in some other countries also helps (e.g. look at BHP's experience in Papua New Guinea).

Some mines can extract gold profitably with grades as low as about 0.1 grams/tonne. If my memory is correct, the avg crustal abundance is about 0.004 g/tonne. That is NOT a huge difference and the consequence is that if gold prices were to double, then there would be a huge amount of currently worthless rock around the world that would become ore. Like everything else, supply and demand has its own braking mechanisms.
regards,
Charlie

[DewDiligence]

Finally, an article on gold that agrees with my viewpoint—i.e. that it’s a dumb thing to invest in:

http://online.wsj.com/article/SB10001424052702304821304577438633632102346.html

See #msg-50737495 and #msg-50601960 for related info.