Gold prices could potentially go to $3000/oz and beyond if the World Gold Council (WGC) calculation on future miner costs turn to be true.
Reuters quotes Chief Executive Aram Shishmanian as saying that gold miners currently need $1300/oz to survive but “for the next five years the gold price needs to be at least $3,000 just to stay in the business” due to rising mining costs, dividend costs and taxes at the host nations. Aram added that future demand will come from emerging markets, central banks and investors.
But whatever gold price does in the coming 5 years, it can't be ignored that gold is currently being stomped on by investors. Performance for 2012 till date has been disappointing to goldbugs. Even though prices had surged in the early part of 2012, gold has crashed at $1780 levels and is currently trading at around $1560/oz. This was almost the price level at the beginning of the year.
And with confusion in Greece showing no signs of clearing out, it seems that precious metals may see more downside over the coming weeks since they are being increasingly viewed as risk assets. This is in complete contrast to 2011 when precious metals were touted as the ultimate safe haven.
Some analysts believe that the gold bull run is not over. And Shismanian's comments that gold miners will need $3000/oz to even survive in 5 years do support the bullish case. But it cannot be argued that at present, gold does not look bullish.
Source: Commodity Online