Gold Below $1,000 Would Put Pressure on Miners

Gold-mining companies will feel pain if the price of the metal should fall below $1,000 an ounce stay there, analysts and fund managers said.

Production cuts are possible as a last resort, and there could be consolidation in the mining sector.

A number of investment banks have forecast gold could fall below $1,000 on higher U.S. interest rates, although most also look for a recovery. But what if prices don’t stabilize?

“Some companies will be OK,” said Dan Denbow, portfolio manager of the USAA Precious Metals and Minerals Fund. “Most companies – below $1,000 – would not because while they might be able to generate a margin on the gold ounce produced, they won’t cover their G&A (general and administrative expenses) and debt service.”

Going into 2015, companies collectively could generate cash flow in a range of $1,150 to $1,250, Denbow continued. Between $1,050 and $1,100, they would need to cut additional costs.

via Kitco

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza