Gold Mining – Rising Prices of Gold are Causing a Boost in Production

Gold Mining – Rising Prices of Gold are Causing a Boost in Production

With the prices of gold soaring, gold mining is once again becoming a place where a company or even a person can earn a fortune. The gold market is currently being supported by jewelry buying in China and India where new strong middle class consumers are emerging and also by global demand fueled by a shaky economy. This is causing gold miners from around the world to boost production as quickly as possible. In fact, Credit Suisse raised its forecast for the price of gold in 2012, and many others feel the same way.

 

Lack of Gold Production Has Supported High Prices

We are seeing a record output in gold production due to the mines ramping up because of high prices, but high prices have been caused by a lack of production. From 2005 to 2008 gold output actually fell. This has been one of the key reasons, in addition to a shaky economy and fear, that gold has risen in price so quickly.

 

Gold Miners Taking a More Conservative Stance Even While Increasing Production

Interestingly, even though the people that are actually doing the gold mining are producing at the fastest speeds possible, they are also hedging. According to Paragon Financial Limited “hedging helps producers lock in prices for future output.” In fact, for the first time in 10 years gold mining companies have taken hedge positions two quarters in a row.

 

The big question, of course, is will the increased production mean lower gold prices in the future. The answer to that question is debatable and depends on who you talk to. Many economists think that gold will continue to rise in price, others think it is at its peak. A lot of it depends on whether the world economies turn around any time soon.

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