Where the price will go in future is debatable. The Post ‘reports:
Santana’s economist, Benje Patterson, provided a range of economic outcomes, based on average gold prices between US$2220 and US$4700 an ounce, suggesting the likely average for the mine’s life was around US$3100.
This seems pretty realistic. The average gold price for the last 10 years has been:
- 2016: $1,320
- 2017: $1,240
- 2018: $1,250
- 2019: $1,410
- 2020: $1,770
- 2021: $1,770
- 2022: $1,820
- 2023: $1,920
- 2024: $2,330
- 2025: $3,270
- 2026: $4,230
Otago Regional Council economist Kirdan Lees accepted gold prices were “exceptionally volatile”. But he also believed prices would stay relatively high given factors such as central banks increasing the amounts of gold they held, with Lees saying the banks wouldn’t do this if they thought they would get burnt by the gold price falling sharply.
Again seems sensible.
However, Richard Meade, an economic expert for Sustainable Tarras, a group opposing the mine, said it was “utterly implausible” that gold prices would remain as high as Santana was predicting.
He said at no time in history has gold stayed over US$3000 an ounce for a sustained period, and he suggested the long-term average price would be between US$1850 and the US$2220 Patterson suggested as his low estimate.
That is a pretty brave prediction – that prices will fall up to 65% from its peak. That has never happened before. I have no economic expertise in this area. But an average price of 25% less than the current price seems a reasonable and even conservative assumption. A halving in price seems rather unlikely.
Time will tell!
David Farrar runs Curia Market Research, a specialist opinion polling and research agency, and the popular Kiwiblog where this article was sourced. He previously worked in the Parliament for eight years, serving two National Party Prime Ministers and three Opposition Leaders
3 comments:
Time will indeed tell. Predictions make fools out of people. Luckily im commenting as anon, so im happy to share my experiences (and predictions).
I own a lot of gold. It's not 'an investment ' as such, more an' inflation hedge', well that's how I look at it. The fact is I purchased most of it around 2020 and 2021, as I expected inflation to grow but its only in the last 2 years gold has gone parabolic.
I believe the long term outlook for gold is to remain at these levels, sure a retracement to even $3k is possible but you HAVE TO LOOK AT THE MONEY FLOWS and who is buying and selling gold. Central banks are buying up large and are prepared to pay for the metal. They are stockpiling for varying reasons that I won't go into here.
Therefore imo, I will continue to hold my hedge/ investment for the foreseeable future in these uncertain times.
Rotation is occurring folks, don't be a dinosaur, adapt.
China has been bulk buying gold for some time in an attempt to wean themselves off the ‘dollar standard’. As China grows to become the next world leader, this will continue. Holding so much gold, they cannot afford to let the price fall too much so they will manipulate it as necessary. The reason for the current dip is primarily Russia and Turkey selling off their gold stocks to prop up their currencies. (The same mistake Gordon Brown made in Britain 25 years ago.) Once that washes through the market it’s onwards and upwards for the gold price as fiat currencies continue to devalue through government spending profligacy.
Visited Reefton recently and was impressed by the air of prosperity it exuded. Then I was told it was largely because of the surge in prospecting activity in the hinterland, a direct consequence of the boom in gold prices. I disagree with Shane Jones on a lot of things, but he is quite right to emphasise the economic benefits of mining, and about time too. Reefton is the model for the whole country and precisely what the fast track consenting process is designed to achieve.
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