Gold prices must rise to as much as $1,500 an ounce to ensure that metal producers survive as costs continue increasing, said John Hathaway, a fund manager at Tocqueville Asset Management LP.
Inflation has pushed the average cash cost of production to about $700 an ounce, before companies factor in taxes and royalties, said Hathaway, who helps manage more than $1 billion. The metal needs to trade between $1,000 and $1,500 an ounce to compensate, he said Monday in an interview in New York.
Producers, meanwhile, have seen their profit margins eroded by surging wages for professional engineers and geologists, record oil prices and higher costs for steel and mining equipment.
Gold futures for June delivery closed up $5.90 at $905.80 an ounce Monday on the Comex division of the New York Mercantile Exchange.
Gold rose to a record $1,033.90 on March 17.
Hathaway said he favors Denver- based Newmont Mining Corp. and Johannesburg, South Africa-based Gold Fields Ltd., the world’s third- and fourth-largest bullion producers.
Both have new management teams, with Newmont’s Richard O’Brien in his position since July and Gold Fields’ Nick Holland taking up his post May 1.
