[miningmx.com] – LOW global inflation and an improving US economy was likely to spell bad news for the world’s gold producers who benefit when economic conditions worsen, said Bloomberg News citing analysts.
“I doubt we’ll see big economic shocks, which is not good for gold,’ Wayne McCurrie, an asset manager at Momentum Holdings, told the newswire. “With a large element of fixed costs, miners are obviously geared to the gold price,” he said.
He was commenting amid a massive sell-off in gold on July 19 which fell to its lowest level in 10 years. A further drop in prices would squeeze margins for producers saddled with high-cost operations, said Pawel Rajszel, an analyst at Veritas Investment Research.
“The industry is not looking good in our view,” Rajszel told Bloomberg. “That means the lower-cost producer should outperform, but companies with higher average costs, or generally just higher-cost mines, will do quite poorly,” he said.
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