Is physical gold becoming an endangered species?

Another one of the gold-mining majors has announced a writedown.

African Barrick Gold has become the latest in a long line of gold mining companies to write down its assets, this time to the tune of $8.7 billion. So far, this is the biggest and most aggressive writedown that we have seen, and it brings the total figure written down by all miners to $21 billion. Considering the price action that we have seen in the underlying commodity, some sort of revaluation was probably in order. The company’s statement explains that the lower spot price dramatically affects the profitability of the company, as it hits its bottom line directly. However, it has not dented the ongoing viability of vast majority of the company’s operations.

This is a pattern that we are seeing frequently repeated, and it has all taken place in the last two months. It is difficult to give a timescale, but a reduction in global production will at some point unwind into the spot price of gold.

One of the reasons that we might not have seen much of a reaction is due to the continuing cooling of China’s economy and the slowing down of demand.

This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.

Find articles by analysts

Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 79% of retail investor accounts lose money when trading spread bets and CFDs with this provider. You should consider whether you understand how spread bets and CFDs work, and whether you can afford to take the high risk of losing your money. Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage.