Gold last reported a.m. is $1162.00 down $6.20 and silver is $15.71 down 13 cents. The U.S. dollar index hit a 12 year high working against precious metals prices.
Allied Nevada Gold Mine filed for chapter 11 bankruptcy citing financial setbacks incurred from below production costs on gold. The company shows debt of $664 million and assets of $941 million as of December 2014. The company reached an agreement with bondholders for $78 million to help fund operations while it restructures. Company financial adviser Barak Klein says the company had less than 4.5 million in cash as of Tuesday.
We’ve repeatedly stated the mining companies can’t continue producing gold and silver at net losses and other mining companies will follow suit or be purchased by larger companies if prices continue to stay where they are. Gold prices dropped 28 percent in 2014 and dropped 1.5 percent last year. If the current trend continues, mines will have no other choice but to halt production forcing gold prices higher.
Allied Nevada owns more than 50 Nevada properties as well as interest’s in some of the state’s most prolific gold producing trends. According to regulatory filing noteholders own more than 67 percent of $400 million in 8.75 percent notes due 2019. Secured lenders will receive a new first lien term loan and noteholders will get equity in the reorganized company. The noteholders providing bankruptcy financing will get a convertible second lien term loan along with new common shares.
In the real world where supply and demand dictate prices the resulting decline in gold supply would mean an increase in prices. Unfortunately for now, paper gold prices, or “fantasy” gold prices are not affected by natural laws and precious metals will continue to be driven down as central banks and governments purchase most of the available global supply.
Eventually, the law of supply and demand will take over and at that point the average investor can forget about having access to gold or silver at reasonable prices. Reality tells us futures markets are beyond a shadow of a doubt rigged because they all defy laws of supply and demand.
At a time when almost 93 million Americans are not working and most jobs added over the past 3 years are low-wage part-time at best, does it seem strange that Wall Street continues to hit record gains? It shouldn’t. When markets are manipulated anything can happen.
Gold and silver remain insurance regardless of what fiat markets dictate or not. In the end illusions are just that, illusions.
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