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By J. Patrick Coolican (contact) 
Saturday, March 24, 2012 | 2 a.m.
J. Patrick Coolican
Sun archives
Well, no one could have predicted this. The The Financial Times reports that “investors are losing their enthusiasm for gold as signs of improvement in the U.S. economy tempt them away from the traditional haven.”
And if it’s made the financial press, you know the bubble has really started to deflate in earnest.
Since 2001, the price of gold has increased more than sevenfold, from just $253 in 2001 to a peak of nearly $2,000 last year, according to the FT. Now it’s down to $1,665 or so.
For the life of me, I can’t figure out why, but people put their money in gold when they’re anxious and economic volatility abounds. And the past decade, beginning with the terrorist attacks on the United States, has been a period of extreme economic volatility, with destabilizing wars, the financial bubble and the Great Recession.
Especially since ACORN fixed the election and the scary Muslim usurped the White House, gold has become a favorite investment of the likes of Glenn Beck, which has driven still more white-knuckled La-Z-Boy occupants to invest. To be fair, newfound wealth among the middle classes of the developing world has also probably increased the demand for gold as decorative jewelry.
Rural Nevada, which is one of the prime gold mining areas of the world, has enjoyed significant prosperity during this boom, halting what had been a long slide into economic stagnation.
The chief beneficiaries of the gold boom, however, are two companies: Barrick Gold Corp. and Newmont Mining Corp.
So, one might think Nevada’s tax coffers would be overfilled with revenue from the gold boom. Nope.
The tax on gold is set in the Nevada Constitution at 5 percent of net proceeds. They’re allowed to deduct a bunch of expenses before the tax is calculated.
They also pay property, payroll, sales and use taxes like the rest of us, but all in all, they have an extraordinarily sweet deal.
But now, with the American economy recovering, investors sense the end of the gold bubble because money is going to start flowing into, shall we say, more productive arenas, like new companies and factories and so on.
Of course, anything is possible. We could have another war in the Middle East or the American economy could stutter again, and gold would probably recover.
But on the present course, I know exactly what we’ll hear if voters are faced with an initiative to increase the mining tax, or what I’ll hear from lobbyists and credulous legislators in Carson City next year if the price of gold continues to float down.
Oh, woe is the gold industry and the proud communities that mine it! Now is no time to raise the mining tax!
People are buying gold because the government keeps printing. Your money is becoming worthless. Older societies that have already been through the money printing scheme covet gold. The Indian dream is to own gold. We will make the Weimar republic look small time, we will take the world down with us. Sorry gold as nothing to do with Rush or even Bush, as the world loses faith in fiat currency, people rush to gold. America is doomed, keep piling up that debt till you choke on the paper, and there will not be anybody left to tax, to pay for it.
Gee -- what are you really trying to say? Isn't it nice that the Progressives have a media like you to promote their cause and give them free advertising? I think the initiative should be to have a 25% gross proceeds on garbage, then media outlets like the Sun would take the biggest hit!!
Mr. Coolican,
Methinks that economic analysis is not your strong-suit.
Purgatory
WOW.....it scares me that I have been agreeing with you so many times lately, but this one is Right On The Money. The mining industry, long time sweetheart of Carson City, has been allowed to carry on business relatively free, while enjoying windfall profits on the metals markets. Newmont and Barrick can either pay their fair share, or their claims can be left to expire, and other companies would be more than willing to take them over, but we KNOW that would not happen. They will pay whatever it takes, because it is not like they can go someplace else. Minerals are here and that is why they are, well besides the fact that they operate for what in essence is free after all the allowed deductions they take.
It seems we might have a governor that will not wilt under pressure and keeping the taxes in place as they should be...so the next question is.... how can we clean out the state legislature and start the State on a path to prosperity?
Barrick Gold paid $88,000,000 in mineral taxes in 2010 (per the companies website). From Barrick's two largest mines in Nevada the extracted just over 2.2 million ounces of gold in 2010 (also from companies web site) Per my simple calculations that's roughly $40 per ounce. Not bad considering the spot gold price traded between $1000 - $1400 per ounce. I think the state might want to reconsider how mining companies are taxed, especially considers the state already give the casino industry a free (lowest gambling tax rate in the world) ride.
"Especially since ACORN fixed the election and the scary Muslim usurped the White House, gold has become a favorite investment of the likes of Glenn Beck, which has driven still more white-knuckled La-Z-Boy occupants to invest."
Best Sentence Written Since Shakespeare
First, don't count Gold out just yet. Gold prices aren't based on the US economy alone. The biggest buyers are in Asia and Russia. Part of Gold's value has been based on the US dollar which over the past several years has lost much of its value. When the dollar looses value everything cost more including gold. Of course gold prices may fall but don't plan on such a fall as to back to the 500 dollar range. That won't happen. It may fall to the 1,500 dollar range or a little lower but as long as the dollar is weak, gold prices will remain high.
Nevada has a thousand-times more gold than the state legislature has brains, that's for sure.
Big Mining can't believe their good fortune. They rob the bank of its gold bullion then get a ride from the crime scene in a police escorted getaway car.
It makes all Nevadans look like clueless suckers.
Gold:
You can't eat it.
You can't drink it.
You can't use it as a shelter.
You can't breath it.
You can't use it to defend yourself or your property.
Do you really need it?
Currently, it costs mining companies apx $300 to mine an ounce of gold that sells for $1,x00+/- p/oz.
The 5% mining tax was written into the Nevada Constitution in the late 1800's. Recently, as it has for well over a century, the mining companies investment in lobbying has paid off handsomely. They don't even pay a measly 5% (gaming companies aren't much better). The mining taxes, like the gaming taxes, need to be brought into the 21st century. Hell, even the twentieth century would be an improvement.
Nevada Mining Tax Deduction Facts
From 2000 through 2007, the mining industry in Nevada extracted and sold gold worth $25.5 billion, and paid taxes to the state general fund totaling $125.3 million, an effective gross state tax rate of one-half of one percent.
Mine owners are allowed to write off expenses as deductions. Over the last eight years, the Nevada mining industry has deducted 79 percent of the value of gold production, and paid taxes only on the value of the remaining 21 percent.
In any given year from 2000 through 2007, one-third to one-half of all the mines operating in the state produced gold worth hundreds of millions of dollars but reported zero taxable proceeds.
Nevada's two largest gold mines, the Barrick Goldstrike mine and Newmont's Carlin Trend project, have reported zero taxable values during years when the mines have produced gold worth a half billion dollars or more.
While the 5 percent Net Proceeds of Minerals (NPOM) tax rate is written in the Nevada Constitution and would take years to change, the deductions by which the mining industry avoids so much taxation are written in state statutes (NRS 362.120) and can be eliminated through legislation, raising tens and possibly hundreds of millions of dollars for the state budget as early as the next biennium.
The lasvegasgleaner.com site has some pretty pictures for those who have a hard time with numbers. http://www.lasvegasgleaner.com/mining.ta...
I agree that mining companies should pay their fair share of taxes, which it does not appear they do. Ordinary citizens pay property tax and sales tax on most everything they purchase, with few loopholes to escape. This privileged status for mining has been in place for a long time, and is carefully guarded. Nevadans are accustomed to being dominated by the few major industries that manage to prosper here. It will be difficult to effect changes that will remedy inequities in the tax code, but it is a worthy consideration. Companies should be good citizens.
Folk who are complaining about J Patrick's economic analysis have a significant problem. Mostly that he's right. Gold is a place to put your money when nothing else is productive, at least not compared with its risk.
As productivity increases and risk abates investors will pull their money out of gold and put it into these better investments. This is how every recession has gone.
test, this is only a test!
Yup, rural Nevada prospered during the Gold boom. So why did the State steal $62 million sewer fee money out of Clark County coffers? Why not take money from rich counties like Elko or Eureka? Why does the State continually not staff offices in Clark with good paying jobs? Go to DMV in Carson City, see if you wait in line. How many foreclosures in Carson City or Reno? Our local state politicians need to get together and address these problems. You wanna talk about the tax rate for Gold? Talk about how it's spent.
This is about money pure and simple. Here's some data to help you decide.
In 2009, the mining industry had gross revenue of 5,800,000,000. After deductions, including some that may have not complied with state law, the net profit was 1,800,000,000. The tax paid to the state of Nevada was 48,600,000. For comparison, in 2010 gaming had the same gross revenue and paid over 425,000,000 in taxes to the state.
The state of Alaska collects a royalty of 25% on oil. Alaska currently has a 3 BILLION surplus in the state budget, and Exxon just reported record 1st quarter profits of over 10 BILLION, so the royalty payment doesn't seem to be causing the oil companies financial problems.
The Barrack annual report has just been published, and shows record profits and dividends above the record levels of 2009. This is a link to the report, you may want to look closely at pages 2, 3, and 4. http://media.lasvegassun.com/media/pdfs/............... Net earnings and profits have jumped dramatically between 2009 and 2010. Shareholders return on investment jumped from 12% in 2009 to 19% in 2010.
In 2010, the Cortez Hill mine in Nevada produced 1.14 MILLION ounces (31.6 TONS) of gold at a cost of $312 per ounce. In the first quarter of 2011, the mine produced 366000 ounces (11.4 TONS) at a cost of $220 per ounce. Assuming a profit of 1000 per ounce, that is a profit of 366,000,000 for the first quarter. If the production rates and cost remain the same, the profit for the year is 1,464,000,000. Of that profit, based on past experience, the State of Nevada will see less than 50,000,000. That is for one Nevada mine owned by Barrick. Of course, mining pays their fair share of taxes. NOT!!!!!!!!!!!!
As interest rates turn positive, money will flow out of gold. Nothing mysterious about any of this. Interest rates have been negative now for almost 4 yrs.
Coolican just lost all credibility by mentioning ACORN. he might actually want to learn what the electoral college does. ideologues are worthless as analysts as bias inhibits the critical thinking process.
"Especially since ACORN fixed the election and the scary Muslim usurped the White House, gold has become a favorite investment of the likes of Glenn Beck, which has driven still more white-knuckled La-Z-Boy occupants to invest."
ROTFLMAO!
Just a mental cartoon visual of that sentence is enough to keep me laughing all week! Thanks, Patrick, you Word-Dog you!
On a more serious note - unless NV develops a real legislative branch that focuses on the problems of the state, bans lobbying, and stops the big money companies from stealing, raping, and pillaging NV, there's no solution.
NV is a microcosm of what is happening in the country, only to the extreme.
Carson City is deaf, mute, weak, and controlled by the 1%. Sound familiar?
Speaking of the economy recovering,lol. It has been on autopilot for 8 months now as Obama has been in full campaign mode now for 8 months and will continue throughout 2012. He is absent from office and will continue to be a non-leader throughout 2012. He is scared to make any major decisions for our country that might have a negative impact on his re-election and is postponing all of them until after the election if he can. That is anything but a strong leader! This is what happens when you elect a man with absolutely zero leadership experience to run the greatest free country in the world.
Reality is no test. Economy is what it is. Do hang with the golden rings as they cling to the rising opportunity.
Mr. Jerry:
"That is anything but a strong leader!"
Pls play someone else for an idiot. Every President in my lifetime has campaigned the last year of a term (except dead ducks) -- even the r's beloved George.
Is that how you intend to convince ppl to vote for your candidate?
As long as the republicans complain about Obama then he has done his job I am Happy and will vote for him again.
May I point out that that conventional wisdom ten years ago said:
"Houses will NEVER go down in value in Vegas because they are not making anymore land."
"Vegas is recession proof so investments in housing here will always give superior yields."
SO:
Don't worry, pour massive amounts of money into gold shares and coins etc because, just like houses, gold will never devalue and, it is not in a bubble.
Really, would people and companies selling gold for commissions (often on credit) lie to you?
How much state income tax do you pay Mr. Cooligan? I really think all newspapers should attack their states industry. Especially when the attacks are political. I imagine that while you are against mining you are for the nuclear waste dump site at Battle Mountain? The price of oil has been fluctuating with the price of gold for years, if the Saudi's don't want our paper for oil what do you intend to trade the oil for, poker chips?
@a-joker
I think you are the one that missed the sarcasm about ACORN...LOL
oh well - not gonna 'splain it to you unless you get out of your laz-e-boy first
lmao
OMG - Nevada is a State? I thought it was a Banana Republic.
Cognastics, please take your blue tinfoil hat off and read my comment again. The main point was about a non-leader behaving like a coward because he will not make any major decisions that might affect his re-election even if it hurts our economy. All other Presidents democrat or republican have been leaders during a campaign year and made major decisions except this one.
Anyone who paid over $600.00 oz for gold was stupid. Obama isn't going to be in office long and gold will plunge when we're back on the right track. Go back during the Carter era, same hype, and same outcome when he was booted. Gold and oil prices will plunge when the liberal agenda goes bye bye.
This summer, our United States Lawmakers/Leaders did NOT pass a budget for our country. It still hasn't. Until that is done, gold will command preminum prices.
It is about our economy, and the confidence citizens have. Those who crashed our economy are still FREE and continuing the same path without anything more than verbal, public condemnation. There is incredible injustice in such.
We are quick to jail shoplifters and potheads, but hey, in the United States, you can steal money and thrive, even the government will pay you to do so!
There are citizens behind the scenes preparing for martial law and government take over. They garner supplies of gold in such preparation. Gold prices will not drop much. It is an election year, and the current establishment wants to dazzle and make it appear and for people to believe all is well.
All that glitters ain't gold.
Blessings and Peace,
Star