Russia Now Has The Least Expensive Mining Costs and Abundant Gold Reserves

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The monthly Global Precious Metals MMI® registered a value of 90 in February, an increase of 4.7% from 86 in January.

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Unlike their base metal brethren, gold and silver got 2015 off to a raring start finding fertile growth ground as hedges against a suddenly uncertain political situation in Europe. Greece elected a far-left new government that is, once again, threatening to abandon the common currency. While lead forecasting analyst Raul De Frutos points out that the strong dollar is likely to weigh down both gold and silver in the long term, the last month has been an unmitigated gain for them.

Global-Precious-Metals_Chart_February-2015_FNL

The recession in Russia is actually good for both, and particularly good for gold. With oil at a 5-year low and economic sanctions effectively gutting international investment in the Russian economy it’s a very good time to mine for gold there.

With gold typically priced in dollars, and labor and other expenses paid in rubles, Russian mining companies led by Polyus Gold International Ltd. are gaining from the weak currency. Russia is the biggest producer of gold after China and its mining companies now have the lowest costs in the world, according to BCS Financial Group, a Moscow-based investment company. Polymetal International Plc, Russia’s second-largest precious metal miner, had average production costs as low as $625 an ounce in 2014, the company told Bloomberg News last month. Bloomberg speculated that their price may fall to $575 an ounce this year.

The strong US dollar, by contrast, has increased costs for every domestic miner in the US. Even China’s costs aren’t as low as those of Russian miners right now.

This is one of the reasons why Russia has been stockpiling gold in its Central Bank since the middle of last year. The World Gold Council reported that Russia’s central bank, Gokhran, accounted for more than half of the gold purchased by central banks in the 3 months prior to September.

As we report this, gold is losing a bit of its luster as the dollar gets ever stronger with no sign of action to rein it in by the Federal Reserve in sight. Investors have also begun to stockpile barrels of cheap oil in hopes of a price increase from the bargain prices available today.  Why hoard gold when you can hoard oil?

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After dropping the previous month, the price of Chinese gold bullion prices rose 7.2% to $41.19 per gram. The price of US gold bullion rose 6.9% to $1,283 per ounce after falling the previous month. After dropping the previous month, the price of US silver prices rose 5.9% to $17.23 per ounce. The price of Chinese silver rose 5.4% to $580.54 per kilogram after falling the previous month. After dropping the previous month, the price of Japanese gold bullion prices rose 4.8% to $41.19 per gram. The price of Japanese silver rose 4.2% to $5.49 per 10 grams after falling the previous month. Chinese platinum bar shifted up 2.7% last month to settle at $42.48 per gram. The price of Indian gold bullion rose 2.3% over the past month to $451.84 per 10 grams, the second straight month of gains. After dropping the previous month, the price of US platinum bar prices rose 2.3% to $1,238 per ounce. For the second month in a row, the price of Indian silver increased, rising 2.0% over the past month to $626.04 per kilogram.

Japanese palladium bar prices fell 8.1% to $25.04 per gram after rising the previous month. After rising the previous month, US palladium bar prices dropped 4.8% to $769.00 per ounce. Chinese palladium bar prices fell 2.8% to $27.79 per gram after rising the previous month. Japanese platinum bar fell a slight 0.7% over the past month to $39.61 per gram.

The Global Precious Metals MMI® collects and weights 14 global precious metal price points to provide a unique view into precious metal price trends over a 30-day period. For more information on the Global Precious Metals MMI®, how it’s calculated or how your company can use the index, please drop us a note at: info (at) agmetalminer (dot) com.

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