The Mining Report: John, what are the global issues you are watching that could have an impact on commodities, particularly gold?
John Kaiser: There is a risk that the economic growth slowdown already underway can deteriorate further, precipitating major general market declines and causing demand for raw materials to flag. This would worsen the current situation where the supply response from the bull period of the past decade is already, in most cases, exceeding demand and, therefore, resulting in a further glut to depress prices and hurt companies involved in both development and mining of raw materials. At the same time, the subdued global growth outlook is creating domestic stresses that in turn are translating into geopolitical conflicts, which have me thinking about security of supply risks should globalized trade come unglued.
May 30 in Vancouver
TMR: What effect does political instability in Russia and the Middle East have on gold prices today? History would suggest that uncertainty would drive prices up but that doesn’t seem to be the case right now.
JK: A major market correction and evidence that the world is sliding back into recession would be negative and push gold down toward that $1,000/ounce ($1,000/oz) level. Many projects are not viable even at the current $1,200/oz level. This would certainly harm the valuations for producers and the near producers.
On the other hand, even if we avoid a global economic downturn, we are still vulnerable to geopolitical disruptions such as Russia’s gradual annexation of Ukraine and its increasingly precarious relationships with Europe spinning out of control and creating some …read more