Gold prices below $1,200 an ounce have led to “severe margin compression” for gold-mining companies, says Bank of America Merrill Lynch. The bank says current “macro-economic dynamics” could mean further pressure on gold, although it also doubts the “status quo” will be maintained and would not be surprised if at some point gold began pricing in a somewhat less hawkish Federal Reserve. Meanwhile, BAML reports on some of the sentiment from the London Bullion Market Association gathering in Peru last week. “With gold prices falling below $1,200/oz, miners highlighted severe margin compression,” BAML says. “This has increased the focus on maximizing operational efficiencies. For multi-mine producers, this can include shuttering higher cost operations; re-negotiation of contracts is another avenues pursued. Scrap supply has also fallen in reaction to declining prices, highlighting that automatic stabilizers are at work, although these have not been sufficient to stabilize gold prices for now given the acute lack of investor interest.”
