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Gold Mining Costs "Supportive of Gold Bull Rally", says Investec

HIGHER GOLD MINING COSTS, together with economic and political concerns, will continue to support the Gold Price, according to a new report from Investec, the South African asset management firm with over $90 billion under management.

The report cited a number of factors that are driving up the cost of Gold Mining.

"Despite having the largest reserves in the world, South African gold production continues to decline as producers face a number of challenges including a strong Rand, rising labor and materials costs, and higher power and fuel costs," it said. "The inability of the global mining community to significantly increase gold production in the face of high prices is very supportive of a gold bull rally."

The report's authors also believe demand-side issues will have a positive effect on the Gold Price.

"In the near term, it does not appear that either geopolitical or sovereign risks will diminish sufficiently enough to weigh heavily on gold. We believe any further deterioration in risk, either in the Middle East or on sovereign debt issues, could propel the Bullion market to new highs," said the report.

Figures released by the Chamber of Mines of South Africa last month showed that Gold Mining output in the country fell 6.4% in 2010. South Africa was the world's largest gold producer until 2006. It has since fallen to third, behind China and Australia.

Global Gold Mining supply peaked in 2001, according to data from VM Group.

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