The gold price has always followed the marginal cost of suppliers throughout history (Figure 1). The correlation between gold prices and gold mining cash costs between 1980 and 2010 stood at 0.85, which is pretty highly correlated (Source: CPM Gold Yearbook 2011).
With the price of gold at $1400/ounce today I'm pretty sure we can't go much lower if this correlation proves to be correct.
The following chart is the most important chart every gold investor needs to be aware of. As I mentioned before, there is a high correlation between the all in cash costs of gold mining and the gold price (Chart 4). So investors need to monitor the total cash cost of gold mining in order to predict the trend in the gold price itself.
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