Gold-mining experts anticipate high costs and supply-chain disruptions to continue into next year, making mining gold that much more difficult.
- Gold prices have fallen this year—below $1,700 an ounce, down 20% from its high of the year.
- Industry leaders met at the Denver Gold Forum Wednesday at the same time the Federal Reserve announced another 75-basis-point rate hike.
- Gold investors are pessimistic about the plight of gold, at least in the short term.
- The costs to mine the precious metal have increased.
- Investors usually flock to gold in high inflationary times.
Why it’s news
Aftershocks of COVID and ripple effects from the Russian and Ukrainian War have driven up inflation around the world. At the same time, continuing supply-chain disruptions have caused consumer and seller costs to rise.
The gold industry isn’t isolated from these effects. Low labor and a sluggish supply chain have disrupted mining operations.
Though fuel prices have regulated, Gold Fields Ltd. has been dealing with higher costs to operate its nine mines in Australia. Labor costs have risen as the company struggles to keep employees. Prices for necessary mining items like explosives and reagents have also gone up.
Central banks around the world have taken similar measures to the U.S. Fed in order to combat inflation. While bond yields and the dollar have risen, single-asset producers have a harder time absorbing the increased costs.
Struggling mine companies could lead to more mergers and acquisitions.
Backing up a bit
- Gold is on its longest losing streak since 2018. The precious metal is typically considered a safer investment, providing stability in economic uncertainty. Prices were high this year following the economic unrest that came alongside the Russian invasion of Ukraine.
- The precious metal reached its high for the year in March at $2,069.40 an ounce. Since June, gold has been trading between $1,650 and $1,800—down around 20%.
If the Fed slows the rate of increases next year as many experts think it will, gold prices could go back up. By next year, gold prices could be around $1,820 an ounce, according to JPMorgan analysts.
“We find ourselves living in interesting times as the global economies and geopolitical environment hit another inflection point. It’s arguable that the last time we faced such uncertainty was the Second World War,” says Barrick Gold CEO Mark Bristow.