Gold and the Problem of Capital Storage

Source: Seeking Alpha, Gregor Macdonald (10/27/10)

"Given accelerating price increases, why hurry to extract the gold?"

One of the reasons gold retains its competitiveness as a capital-storage unit is the rather slow and plodding rate at which supply is brought to market. Since 1900, compound annual growth of world gold production comes in at 1.098%—below the increase for a number of other natural resources and, in particular, well, well below the rate of credit production—the "resource" that now plagues the developed world. Indeed, the overproduction of credit the past 25 years has once again driven capital back into hard assets like gold. This brings up an intriguing subject—the conversion of resources into financial capital and the conversation of financial capital back into resources. Let's take a look at the chart. . .

World Gold Production 1900-2008

The migration of capital, between the world of natural resources and that of finance, has been addressed by numerous thinkers, one of the more compelling being Harold Hotelling. Writing in the Journal of Political Economy in 1931, Hotelling proposed that a rational producer of resources would only be inclined to extract and sell that resource if the investment opportunities available with the capital proceeds were greater than simply leaving it to appreciate in the ground. Given Hotelling's theory of resource extraction, what has happened to gold production since 2000? Does the chart reflect geological and cost limits to increasing gold production, even as the price rose from $250/oz.–$1,000/oz.? Or, has there been some moderate yet gathering decision by global gold producers to extract gold more slowly? After all, why extract gold to merely convert gold into paper currency, beyond the need to pay for the cost of production and provide, say, a dividend to shareholders? Given the rate at which the price has been rising, why hurry to extract the gold?

Announcing Streetwise Live! Events
Source: Streetwise Reports (07/13/2020)

Streetwise Reports is offering 100 investors—at no charge—the opportunity to meet via Zoom with executives of precious metals companies as they discuss recent developments at their companies and upcoming catalysts.

"China's export quota could be opportunity for Canadian miners"

Latin America: Six Gold Juniors Amass 100M+ Ounces
Source: Marc Davis, BNW News (05/25/2010)

Latin America, the world's last great mineral frontier for prolific gold discoveries, is proving a godsend for some lucky investors.

Mexico: Gold's Next Powerhouse Player
Source: Marc Davis, BNW News (11/03/2009)

As the world's key gold producing nations struggle mostly in vain to replenish dwindling below-ground supplies, Mexico is bucking the trend in a big way.

Where Have All the Gold Mines Gone?
Source: Brent Cook, Exploration Insights (04/14/2009)

Given the declining global gold production, mining companies’ demand for reserve replacement and the acute dearth of new gold discoveries, there is no doubt that real economic discoveries will be exceptionally valuable. . .the opportunity for stellar profits is the best it has probably ever been. Identifying the few successes, however, will require vigilant and constant technical assessment of geology and drill results, always with an eye to mine economics.

Congo Completes Mining Review, Says Majors Quit Talks
Source: Reuters (12/20/2008)

"Review process is extended an additional 45 days to allow six companies to return to the negotiating table for direct talks with government ministers."

I haven’t spoken to my old mining stock friend, noted and universally respected gold stock guru, Bob Bishop, about Rare Element in a year, but I hear he is still a supporter and very large shareholder. I don’t believe he will hold it against me to remind you that this was one of his favorite holdings when he left the newsletter writing business. . .

It's Only the Beginning for Uranium
Source: www.financialinsights.com (06/03/2005)

Dr. Richard S. Appel, author of Financial Insights, first became bullish on uranium in mid-2003, when it appeared obvious that its supply versus demand equation was fated to seriously drive higher its price. Since then, a series of events in the uranium industry has led Appel to believe that uranium prices will reach never before seen levels.

(00/00/0000)