GoldSeek Radio Nugget - Bob Hoye: Gold’s Real Price Is Relative to Mining Costs

Bob Hoye, market historian and author from Charts & Markets.com, thinks the holiday cheer is over and the "everything bubble" may burst! 

- As the cost of mining bullion declines, gold miners are becoming more profitable:

Hoye elaborates: 

"I don't put too much effort into the gold price in dollar terms. As I mentioned, that's the old mantra  'Dollar down gold, up, gold stocks up' and that speculation in foreign exchange markets...and I've gone to the real price and taken gold and divided it by the CRB [Commodity Research Bureau Index]. With the suggestion that CRB is a proxy for mining costs, and then when you divide by crude oil, and you consider that about 60%. Actually, operating a mine is energy-related, you know, you've got those big diesel trucks and blasting agents and all that sort of stuff.

So this is where gold price relative to costs is going up. Now I saw a more famous name the other day, saying that gold was going to go to $15,000. What happens if crude oil goes to 40,000 and they don't make any money? So that's the old dollar down, gold up, gold stocks up story. And I've seen this guy usually come up with a $10,000 target when you get a rally. And this time, as the first I've seen $15,000, which is bizarre.

So the main thing is that the cost, bullion price is rising relative to the costs of mining – and this is why in previous post-bubble depressions, the mining sector has become the big game in town and you have miners making money – and because the pricing pressures are so severe in the post-bubble contraction, most industries in commerce are really not making any money...but because the costs for mining gold are going down, 'Hey, the gold miners make money!' and it's been doing it for a long time."

- Bob outlines his unique analysis of the deflated price of gold over hundreds of years.
- The small cap mining stocks are oversold and showing excellent signs of life.
- A review of the price of gold relative to the commodities index, i.e., inflation adjusted gold - notice that when the blue line - 50 week moving average is up, the gold price tends to advance:

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