Salient to Investors:

Gold miners will accelerate spending cuts and trim high-cost output as gold’s biggest fall since 1980 threatens to make about 30 percent of production unprofitable.

Gold is down more than 20 percent since its record close in August 2011, thus signalling a bear market.

Dundee Capital Markets said the average all-in cost of 20 gold producers was $1,306 in Q4 2012.

Joseph Wickwire at Fidelity’s Select Gold Portfolio said that below $1,300, 30 to 40 percent of mine production is not cash-flow positive, but the gold price drop looks similar to declines in 2008 and is only temporary, so buy gold companies now. Wickfire said the space is akin to a financial-assets insurance policy – you buy your insurance policy when it’s cheap and not obvious that you need it.

Gold companies have underperformed bullion for each of the past six years due to money-losing takeovers, over-budget projects, and investors chose gold-backed ETFs.

Stephen Walker, Dan Rollins and Sam Crittenden at RBC Capital Markets said the average all-in costs for North American gold producers is $1,200, so balance sheets could experience significant pain in a sustained slide under $1,300 as companies cut all discretionary spending, cut capital spending sharply, defer new capital development programs, and in some cases cut dividends.

Barry Schwartz at Baskin Financial Services recommended standing aside and avoid the train unless you are able to look out many months.

Andrew Kaip at BMO Capital Markets said we are at levels for both gold and silver where investing capital has to stop for a number of operators.

Jeffrey Burchell at Aston Hill Financial advises waiting before looking for buying opportunities because we need a shakeout, when the high-cost producers move away from high-cost production and take supply out.

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