Serdar AYDOĞAN

Gold, which first appeared in human life as ornamental jewelry around 4000 BCE (with the earliest findings in Bulgaria and Mesopotamia), later transitioned into being used as a raw material in industrial production and as currency in trade, thus maintaining its importance through diversification.

Regarding the primary topic, the price of gold is currently around 1930 USD per ounce (31.10 grams) in global markets. The costs associated with gold extraction and processing have recently been among the most frequently asked questions. The gold processing or mining cost, often referred to as AISC (All-In Sustaining Cost), includes several factors:

• Exploration costs
• Extraction costs
• Costs associated with acquiring exploration and extraction rights
• External capital and administrative costs
• Taxes and royalties
• Maintenance and development costs of the mine
• Sustaining capital costs

In the first quarter of 2023, four gold-producing companies saw a decrease in costs, while others experienced an increase. Considering the global inflation rate at around 7-8%, it appears that the cost of gold production has risen by a similar rate.

In 2000, the AISC (production cost) was 300 USD; by 2022, it had risen to 1232 USD, and as of September 2023, it had increased to 1358 USD. Interestingly, many experts argue that this rise is not primarily due to inflation or the pandemic but rather to increasing production costs.

As illustrated in the graph, the average costs of large gold companies appear to have reached record levels of 1350 USD. The dotted line in the graph shows that in 2012, the cost of gold briefly fell below the price, while in 2013, it remained above the price of gold.

In conclusion, based on the analysis of cost values from many companies, we can consider the average gold cost to be around 1400 USD. The current price is 1930 USD, and the difference in cost (1400 USD) fluctuates around 530 USD, which is considered normal.

Question: Will gold prices fall or rise? Will production costs decrease below the gold price?

Answer: Technically, over the last three years, the price has fluctuated between 2075 USD and 1685 USD, offering no clear indication of whether it will fall or rise. A drop to around 1685 USD would bring the price closer to production costs, making it seem cheap. Additionally, geopolitical factors, such as the Russia-Ukraine conflict and the Israel-Palestine war, along with oil price hikes by Iran and the USA, could influence gold costs, causing gold to potentially drop to 1600 USD, which would be perceived as very cheap. Prices above 2000 USD would lead to new record highs.

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