Spring 2011 - The Association for Mineral Exploration British Columbia

Patricia Mohr
as the global economy strengthens, as
was the case in the mid-’80s.
In a recent survey, PricewaterhouseCoopers
asked executives at 44
gold mining companies around the
world where they think gold prices are
going. Responses ranged from $1,400
to $3,000 per ounce, but 40 per cent
believe the price will peak at $1,500.
The majority (73 per
cent) expect the price
to increase in 2011.
One reason for their
optimism, according to
PwC’s 2010 Global Gold
Price Report, is that current
gold prices are still
below the inflationadjusted
high in 1980.
The authors cite a
Bloomberg report stating
that “gold would
have to reach $2,435
per ounce to surpass
the inflation-adjusted
peak in 1980.” Notwithstanding,
companies
were cautious about
what price they applied
to their 2010 reserves, with 32 per cent
applying a price of $1,000 within a range
of $850 to $1,300.
As for what’s driving current prices,
50 per cent of respondents cited ongoing
weakness in the U.S. economy, as was the
case in 1980. But the 1980 flight to gold
was short-lived, reflecting broad dissatisfaction
with then-president Jimmy
Carter’s policies. Gold prices shot up
like a bullet, only to free-fall as president
Reagan took office in early 1981. Prices
fell further as the U.S. economy and dollar
strengthened.
Central bank sales and forward sales
by producers kept gold prices in the
$300-$400 range for most of the next two
decades, ultimately pushing prices to an
all-time low of $251.70 in mid-’99. Prices
increased later that year, but only after
central banks agreed to limit gold sales in
order to help the beleaguered industry.
Silver followed gold’s path, but its 1980
high was linked to an attempt to corner
the silver market by the Hunt Brothers.
The price quickly fell below $5.00 per
ounce and remained low for decades.
In contrast to 1980, recent gold prices
have appreciated more slowly, interrupted
by occasional market corrections. Another
difference is that the financial meltdown
that rocked Wall Street in 2008 has
escalated into a sovereign debt crisis still
cascading across the western world.
Quantitative easing (printing money)
and stimulus spending initiatives in the
U.S. and European Union were implemented
to alleviate these crises. But
24 SPRING 2011 Photograph: Alan Gough/AME BC