The old adage about the frog in the boiling water slowly getting cooked without jumping out is a good metaphor for the mining industry in the US over the last 12 months.
While the big story in commodity circles has been the oil price decline, a far more potent force has been the currency moves. The rampant US dollar has “saved” the bacon of many a miner in Australia, Canada, South Africa and elsewhere while brutally pressure-cooking those that are focused on the mining space in the US.
The chart above sourced from US Global Investors shows the last twelve months’ move in the gold price in various currencies. The USD gold price is clearly the laggard while Brazil has been stellar. It’s a pity there are not more Brazilian gold mining opportunities on offer. Ironically the strength of the Real for the preceding five years meant that Brazil was not such a good place for junior explorers to spend their drilling dollar.
The attractiveness of Canadian gold miners is even starting to outstrip the advantage that Australian clawed back last year. While the AUD has stopped failing (touch wood) against the USD the Canadian dollar has dropped even further as the oil price has plunged to new depths.
The chart below though shows the ten year gold price in AUD. While still a few hundred dollars off its all-time highs, the Australian industry has gained some ground on cash costs since the 2011 high, due to the falling oil price and the onset of some cost deflation in a broader sense after the rip-roaring FiFo days of champagne and roses that mine workers experienced Down Under.
The clear message from all these gold price movements in non-USD is that US gold producers are getting outfoxed by just about everyone these days and their currency is the culprit.
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