Dear CIGAs,

It is my feeling that gold is headed on this move to $1650 with its normal drama.

Let’s think about what this means to gold producers.

With gold valued at $1650 per ounce:

- 500,000 ounces = $825,000,000 less the cost of mining.
- 1,000,000 ounces = 1,650,000,000 less the cost of mining.
- 2,000,000 ounces = 3,300,000,000 less the cost of mining.

Costs:

- Underground average costs are approximately $500-$600 (assuming no derivatives or derivatives covered as international and Canadian GAAP requires derivative losses be expensed to the specific property).
- Open cut average costs are approximately $300 (again, assuming no derivatives or derivatives covered).
- On surface average costs are approximately $22-$75 (again, assuming no derivatives or derivatives covered).

Economist tips gold price to keep rising
By resourceINTEL · June 18, 2010 · 9:58 am

THE price of gold could reach $US1450 an ounce by the end of the year after surging to a record high early yesterday, an economist says.

The precious metal settled at $US1248.70 an ounce on the Comex division of the New York Mercantile Exchange, up $US18.20, and nudged $US1248 in spot trade in Sydney yesterday.

Clifford Bennett, chief economist at independent research firm Herston Economics, said gold could fetch between $US1350 and $US1450 per ounce by the end of the year.

Mr Bennett said the most bullish predictions of a $US3000 per ounce gold price could be a reality by 2015. He was a strong believer in gold’s future, not for the usual reasons “based on fear” or it being a hedge against inflation.

“I know a lot of people back gold because they are worried about Europe, but I think Europe is fine. There are not going to be any defaults,” Mr Bennett said.

“Manufacturing is strong in Europe and the US, and China is still a juggernaut.

“I’m bullish on gold because the two most populous countries in the world, China and India, also happen to be the two fastest growing countries in the world.

“They are getting wealthier at a faster rate than anyone else and are the two countries that culturally value gold more than any other society.

“The demand for gold, just on increased wealth in China and India alone, is going to be tremendous, and when you add to that strong manufacturing, strong industrial production, from all three major continents in the second half of this year . . . demand could outstrip supply.”

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