Will there be a Gold Crunch in 2015?

In 2013, economist Nouriel Roubini predicted that gold prices would fall to $1,000 per ounce in 2015. It has been reported that, as the deadline for the prediction draws ever closer, more and more market experts think Roubini may have been right. Could now be the time to sell?

It seems that members of the mining sector would be the hardest hit by such a significant price drop. At $1,000 per ounce, gold would cost more to mine than it would actually be worth – and there are hardly any areas where mining companies could make cuts to reduce operating expenditures. Their only options would be to reduce exploration and development while mining less gold.

Such a price drop would be unsustainable, and a $1,000 price point would likely only be a phase. However, the compound effect of those mining reductions could create a gold supply crunch that would affect the market for at least a few years. As the year end approaches, we’ll keep our fingers crossed for the best. 

Swiss Referendum Results

Switzerland’s proposed referendum to force the Swiss National Bank (SNB) to more than double its gold reserves was rejected by voters on November 30 with a majority vote of about 77%.

Had the “Save Our Swiss Gold” referendum passed, the SNB would have been required to increase its gold reserves from about 8% of total assets to 20% by 2019 and repatriate at least 30% of Swiss gold being held overseas. The referendum would have also barred the SNB from selling any more gold.

If you take a look back at the gold prices, you can see a sharp dip the day after the vote. But the bearishness soon wore off as the week progressed – as most analysts had predicted.

Since the referendum was predicted to fail, the effect on the markets was not as substantial as it could have been. Even though no one is surprised at the result, the SNB and other policy makers are no doubt relieved that vast majority of Swiss citizens stand behind the SNB’s current monetary policies. As such, the status of Switzerland’s gold reserves is not likely to be challenged again anytime soon.

Did Switzerland make the right call? Give us your opinion on Twitter or Facebook.

Key Terms for Bullion Investors

The gold market is a fast paced environment – if you are new to the business of bullion buying, trading, or selling, you will quickly find that there can be a lot of jargon in typical transactions. Here are some important terms you should know if you’re just starting out in bullion dealing:

Ask: The price that a seller will agree to in order to complete a sale. The "ask" will also sometimes be referred to as the "bid" or "spread."

Bull-Run: When gold experiences a period of rising prices, it's referred to as a "bull-run." You can evaluate past bull-runs on our historical gold prices page.

Certificate: Gold certificates are a way of owning gold without taking a physical delivery of bullion.

Fine Weight: This represents the bullions millesimal fineness in terms of weight. In other words, the actual weight of the pure gold in sample of bullion, as opposed to its total weight.

Intrinsic Value: Refers to the value of the precious metal within a bullion coin, as opposed to any sentimental or historical value it may have.

New York Close: Due to time differences, the New York gold market closes after the London market does. Depending on economic factors, market fluctuations, etc., the gold price at New York close might be higher or lower than the London fix.

Contact MGS for details if you want to start selling our gold bullion bars through your storefront as our affiliates!