Have Wall St. Investors Lost Faith in Gold Miners?

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Dec. 31 (Bloomberg) -- Bloomberg’s Ken Hoffman discusses the gold industry Newmont Mining’s swan dive. He speaks with Scarlet Fu and Erik Schatzker on Bloomberg Television's “Market Makers.” (Source: Bloomberg)

The miners took a hit.

-- newmont is not unique, in that all the miners took a hit.

What we have seen over the past three years is the price of gold is down 15%. the average company is down 60%. the model is broken for miners.

A lot of things are going wrong for these guys at the same time.

They have written down tens of billions in assets.

How much more do they need?

Many are acting more in the future, and that is why people do not like miners.

You buy a gold stock because you want to participate in the price.

And then the price goes down, and the cost for miners rise almost perfectly with the price of gold, so investors do not make money.

They have left those companies and are going right into the etf's if they are interested in gold.

How much of a problem for these companies and those that do or do not want to invest in them, how much of it is rising production costs?

All of it.

When you buy a company, you'd expect to participate in the upside of the company.

If you think gold is going to $2000 next year, you will buy some gold mining companies and make some money.

That did not work out in the last decade, so these companies have come under a lot of pressure, and it has caused a lot of problems.

If i want to buy gold and i like it, i will be like polson and load up on gold etf's. not saying that it is wrong or right, but that is what they are doing.

When you look at these gold miners, but is there production cost on average?

We know where gold is, $1200. the industry is trying to right the ship here they use to go by cash cost, but they have since come out with something called all in sustaining cash cost.

That is supposed to be an apples to apples measure of what it cost to produce an ounce of gold.

It is about $1000 for the seniors.

For the mid tier, about 1200. pretty much where we are with the price of gold today.

If goldman sachs is right and gold drops to $1000, these senior mining companies would, honestly, be making nothing?

Exactly right.

What we saw in the financial crisis, when the price of gold took a sharp downturn in 2008, you saw a 20% reduction in gold production.

You are seeing that phrase come down to low levels again.

It will be interesting to see when they come up with their fourth quarter, will they have write-downs again, will they close down mines?

There have been revisions of pushing back production.

That has been a big issue for these guys.

Thank you so much, ken hoffman.

This text has been automatically generated. It may not be 100% accurate.


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