Two reasons why you should own gold today

Julie Brownlee, Fsp Invest, 19 May. 2014

Tags: gold, physical gold, own gold, should i buy gold, why buy gold, gold exploration, costs, gold supply

Gold is a store of wealth. It has been for centuries. More recently we’re seeing governments, like in China and Russia, buying more gold. They’re turning to the yellow metal to store their countries’ wealth in. This means that demand for gold is increasing yet supply is falling. Let’s take a closer look at two reasons why there are going to be problems with the supply of gold in the future…

Reason #1: The costs to produce gold are soaring

Gold producers are battling with rising costs. These include:
  • The cost of getting the gold ore out of the ground;
  • The energy costs for excavating gold;
  • The labour costs; and
  • The expertise of geologists is more costly due to the shortage in skills.
The fact is, easily accessible gold is disappearing quickly. South Africa has the deepest mines in the world as all easily minable gold is gone. Now South Africa’s mines are up to 4km deep!

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Mining at such depths increases the costs and risks to the mining producers and workers, the research team at the Resource and Scarcity Report explain.

Gold producers can’t keep mining if the costs outweigh the money they can make from gold.

Reason #2: Gold exploration isn’t finding enough new deposits

The new deposits discovered aren’t matching current gold output. The Metals Economics Group in Canada says that over the past 16 years, gold production came in at 1.1 billion ounces. Discoveries over the same period have found just half that amount in large deposits (finds of 2.5 million ounces or more).

Even though companies continue to plough in millions of dollars into gold exploration, rising costs are making it almost uneconomical.

"Own this hot commodity share before the end of the month, and hold on for a 108% gain!

It's not the sexiest of all the metals.

It doesn't have gold's "bling"... Or silver's sparkle.

But the point is... It's used to keep the lights on in virtually every country on the planet!

And the company I want to tell you about today is sitting on nearly R200 billion worth of the stuff!"

When costs get too high, gold producers will stop mining until the gold price rises enough to make it viable to produce again. This will put additional pressure on supply.

Both of the above reasons show that gold isn’t going to come down in price. There are pressures pushing it higher over the long-term. With a lower gold price, it makes investment sense to buy gold at this price.

So there you have it, two reasons why you should own gold today.

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