The price of gold
Did you know that New Zealand now makes more money exporting gold than wine? Yep, that one metal now produces more export income for NZ than our entire viticulture industry (which is also great).
Where the price will go in future is debatable. The Post ‘reports:
Santana’s economist, Benje Patterson, provided a range of economic outcomes, based on average gold prices between US$2220 and US$4700 an ounce, suggesting the likely average for the mine’s life was around US$3100.
This seems pretty realistic. The average gold price for the last 10 years has been:
- 2016: $1,320
- 2017: $1,240
- 2018: $1,250
- 2019: $1,410
- 2020: $1,770
- 2021: $1,770
- 2022: $1,820
- 2023: $1,920
- 2024: $2,330
- 2025: $3,270
- 2026: $4,230
So they are saying the average price will be around 25% less than the current price (which is 13% down from a peak already)
Otago Regional Council economist Kirdan Lees accepted gold prices were “exceptionally volatile”. But he also believed prices would stay relatively high given factors such as central banks increasing the amounts of gold they held, with Lees saying the banks wouldn’t do this if they thought they would get burnt by the gold price falling sharply.
Again seems sensible.
However, Richard Meade, an economic expert for Sustainable Tarras, a group opposing the mine, said it was “utterly implausible” that gold prices would remain as high as Santana was predicting.
He said at no time in history has gold stayed over US$3000 an ounce for a sustained period, and he suggested the long-term average price would be between US$1850 and the US$2220 Patterson suggested as his low estimate.
That is a pretty brave prediction – that prices will fall up to 65% from its peak. That has never happened before. I have no economic expertise in this area. But an average price of 25% less than the current price seems a reasonable and even conservative assumption. A halving in price seems rather unlikely.
Time will tell!