Fuel costs represent close to 10 per cent of overall costs for a miner, and potentially more for those with large open-pit mines and high stripping ratios. This is because they need large fleets of gas-guzzling trucks to move rocks around.
A 65% reduction in fuel costs, leads to a 6.5% reduction in overall costs. The market has not give the miners the proper consideration for this benefit. Gold moves down 1% and the miners are killed with 5% loss, whereas fuel prices drop 65% and miners get another kick in the butt because the gold/oil ratio is supposed to be "respected".
I don't think the market is taking into account the fairly significant benefit that miners are receiving from the stunning drop in oil prices. Traders seem to use this as a surrogate for precious metals, but there are actual businesses behind this thing and there is no doubt that the lower costs of fuel are benefiting their bottom line.
With the weekly chart in view, gold has been in a downtrend channel for two years. Gold is right now touching the bottom trend line and with a double bottom in play.
So, up from here over the next few weeks is most likely, imho. However, the previous transits from bottom channel line to the top took about 10 weeks on average. And the top of the channel will be about 1150-1160 most likely. It will be interesting to see it break through the top of the channel, and bears will cry, that's for sure.
I guess the USD would need to come down significantly for this move to happen and, looking that chart, it seems that it might be starting a new wave down. We'll see.