Gold Bubble Bursts As Price Dips


By Beth Dodd:





The price of gold’s most drastic two-day decline in thirty years happened on April 15 and 16. The precious metal’s value fell 10% or $155.50 per ounce, down from $1,535.50 to $1,380.00. The burst of the gold bubble raises questions about the future of Teller County’s biggest employer, the Cripple Creek & Victor Gold Mine.
The price drop was prompted by high volume gold sales following a report that China’s factory economy is showing signs of slowing down. China is one of the world’s largest consumers of gold. Gold is also used as a buffer against high inflation, which was expected after the recession, but did not happen.
However, the CC&V Mine’s Community Affairs Manager, Jane Mannon states that there is no reason to worry about any impacts on local jobs or ripples in our local economy, even though the last time gold prices were this low was over two years ago in February 2011.
“The change in gold price doesn’t affect us or our plans or operations,” Mannon said. “We don’t anticipate there being any impact. One thing that might impact us more in the future is the price of commodities like fuel and tires for the delivery trucks. In terms of gold price, it doesn’t impact our operations. There would have to be a much greater change for it to do anything.”
Even so, the value of Anglogold Ashanti stock fell from $1,562.50 on Friday, April 12 to $1,325.00 by the close of business on Friday, April 19. Anglogold Ashanti is the parent company of the Cripple Creek & Victor Gold Mine. One of the top gold producers in the world, they have operations in ten countries and employ over 60,000 employees and contractors.
Until the recent price correction, the price of gold has been rising for much of the past fifteen years, from a low of $254.00 in August 1999 to an all time high of $1,895.00 in September 2011. During this time the CC&V Mine extended its operations, and it began a second extension in 2012.
Also in 2012, a second gold mine opened near Cripple Creek. The Providence Mine, an affiliate of Murphy Mining, has renewed underground hard rock mining, demonstrating that the famous locale is far from being played out.
Although the value of gold has been slowly dropping since October 2012, its value remains high, around $1,400 an ounce. Small gains were made the rest of last week, but following the recent tumble in the gold price experts are undecided as to whether or not it will continue to turn down or recover.
However, when the current Cresson Project open pit mine was begun in Cripple Creek back in 1995, the price of gold was only about $385.00 an ounce. While total production costs rose from $372.00 an ounce in 2007 to $475.00 in 2009, there is clearly still a lot of room left to earn a profit.
Gold has traditionally been very volatile with investors making or losing huge amounts of money over short periods, although they sometimes use it to fortify their portfolios against stock market uncertainty.
For example, gold experienced a bull run from October 1976 to October 1980, rising from $116 to $682 in four years. But this rally was immediately followed by a crash with gold loosing 45% of its value by July of 1982, back down to $310. It took over 25 years for the price to recover and for investors to make their money back.