A year on from one of the biggest gold prices falls in decades, listed gold miners like EVOLUTION FPO (ASX: EVN) and Silver Lake Resources Limited (ASX: SLR) are still battling to preserve margins and earn returns for shareholders.
The changing environment can make it hard to get a read on where the precious metal is headed so to help you get your bearings, here are the three things that every gold investor must know today:
1. A sustained slump into 2015
Apart from a brief upward climb earlier in the year driven by fears of war in Ukraine, the price of gold has continued to suffer in 2014. The price has fallen 11.5% since March to sit at US$1,223 per ounce (oz) today as the U.S. economy storms ahead and the U.S. dollar strengthens.
This echoes analysts' predictions of late last year that there were "limited positive catalysts" supporting gold in 2014.
Looking ahead to 2015 analysts are still painting a grim picture for gold. Goldman Sachs has set a target of just US$1,050 per oz in 12 months, while HSBC forecasts a price of US$1,175 per oz in 2015, and Societe Generale foretell of a price "well below" US$1,200 according to Bloomberg.
2. Supply greater than demand
According to the World Gold Council there was a 10% increase in the global supply of gold in the second quarter of 2014. This is likely in part a result of gold producers targeting higher grades of ore to reduce production costs per ounce.
However in the second quarter of 2014 demand for gold sunk 16% compared to 2013 which the World Gold Council attributes to a strong jump in demand during the second quarter of 2013. The widening gap between supply and demand could be another factor contributing to the falling price for gold.
3. Is 'Peak Gold' coming?
While some are bearish on gold's prospects, The Australian has reported Goldcorp (NYSE: GG) CEO Chuck Jeannes believes that falling mine lives and the increasing difficulty of finding new gold discoveries will result in 'peak production' of gold in 2015, resulting in a sustained rise in the price of gold in the next 5-10 years.
Slowing gold discoveries is a factor which has been raised before by our own Newcrest Mining Limited (ASX: NCM) and if true could make the company highly attractive given its large reserves and current long production life.
