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Randgold's CEO complains that gold mines do not cooperate sufficiently. Despite last year's drop in gold prices, mines continue to increase production. In some cases, they market their product at a loss.
Bloomberg writes that the annual production of gold mines worldwide exceeded 3,000 tonnes for the first time last year. This is despite the fact that the gold price fell last year for the first time in more than a decade and the demand for physical gold will be lower this year than last year.
According to Mark Bristow, the gold mines themselves are responsible for the weak development of the gold price. "The sector continues to market gold at a loss. As an industry, we are not disciplined enough."
RandGold's CEO is probably referring to the lack of coordination in the gold mining sector. Just as oil-producing countries coordinate their production to maintain a certain price, countries with a gold mining sector could also work together to regulate the supply of gold in the market.
Because there is no good coordination between gold mines, their end product is offered on the market at a price that is far too low. This low gold price is bad for the sector, because gold miners have to invest a lot every year to maintain their production for the longer term.
This year, the Gold price already increased by 10%, but many mines are still struggling. This is also reflected in the valuation of mining stocks. Since September 2012, the valuation of GDX and GDXJ has halved.
