Gold down again, some miners selling at loss
Gold prices fell on Monday as traders locked in profits after last week’s rally that boosted prices from 4-1/2-year lows.
Spot gold was down 0.6% at $1,171.80 an ounce, while U.S. gold futures for December dropped 0.6% to $1,162.90 an ounce around 11:00 a.m. on the Comex in New York.
Some analysts believe Friday’s rally was a brief break for the precious metal prices, triggered by a stronger dollar and expectations that the Federal Reserve will raise interest rates as the economy improves, cutting demand for a store of value.
They think that as far as the Bank of Japan and European Central Bank remain on an easing path the dollar is likely to continue its ascent, pushing gold down further.
"We've had a bit of a bounce and I think we're going to go sideways for a while, but at the moment the risk is the downside," Simon Weeks, head of precious metals at Bank of Nova Scotia told Reuters.
Miners that spend more than $1,100 to produce an ounce of gold are racing to cut costs.
Canada-based Kinross Gold (TSE:K) (NYSE:KGC), which has mines and projects in the United States, Brazil, Chile, Russia, Ghana and Mauritania, has said is not afraid of making tough decisions. The Toronto-based firm has already said it would not expand its Tasiast gold mine in Mauritania if lower gold prices persist. Tasiast, which has suffered multiple writedowns, is more expensive to operate than the rest of Kinross’ mines.
Iamgold Corp. (TSE:IMG), another Toronto-based miner with operations in Canada, South America and West Africa, spent nearly $1,200 to produce an ounce of gold in the first quarter. That was whittled down to $1,136 in the following quarter.
In comparison, South African Harmony Gold (NYSE:HMY) (JSE:HAR) spent $1,245 to produce an ounce.
There are producers making money at current prices. In the third quarter, so-called all-in sustaining cash costs were $834 an ounce for precious metal giant Barrick Gold (NYSE, TSE:ABX) and $711 for Englewood, Colorado-based Alacer Gold Corp. (TSE:ASR). The measurement includes the expense of mining and replacing reserves through exploration, as well as other costs like corporate expenses. Not all mining companies calculate this figure the same way, and not all companies report it.