Treasure Chest | Jun 28 2013
By Rudi Filapek-Vandyck
It has become a common theme among gold watchers and analysts this month: those who had taken a negative view on the precious bullion have now come to the conclusion their view simply wasn't negative enough.
The same has happened at the commodities research desk of UBS where the analysts suggested in February that a 50% Fibonacci retracement from the Sept-11 high could lead to a US$1300/oz target for gold. Yesterday the price temporarily sank below US$1200, so that target has come up short.
UBS analysts have given it another go: The next level of potential support looks to be the 61.8% retracement at US$1155/oz and if that proves not to be low enough, the 76.4% retracement is at US$975/oz.
A more controversial research report was issued by commodity analysts at Citi. Controversial because Citi analysts have taken the liberty of ignoring the cost price levels published by the world's gold miners and instead add-in all cost ingredients including capex, exploration, corporate costs, cash taxes and other operating costs themselves. The conclusion? Nobody is making money at current price levels.
Yes, you read that correctly. Citi thinks 90% of all Goldminers currently in operation are losing money at the current, unhedged price of gold bullion.
Citi's conclusion is the industry will be forced to move into survival strategies. The next decade will thus be characterised by high cost asset disposals, reduced capital budgets, lower exploration expenditure and balance sheet recapitalisation, predict the analysts.
Technical limitations
If you are reading this story through a third party distribution channel and you cannot see charts included, we apologise, but technical limitations are to blame.
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