Steve Friess, Senior Writer, Politico
BY AMY KINGLSEY -- The gold rush is over. At least for the moment. Gold prices took a historic nosedive yesterday, plummeting more than 9 percent for the biggest single-day drop in 30 years.
According to the Bureau of Land Management, Nevada produces 75% of the gold in the U.S. Several small towns in the central and northern parts of the state depend on the health of the gold mining industry.
So how will they react to the falling price of gold? Steve Friess visited the mining town of Eureka in 2011, and said the community probably won’t be panicking over gold prices that still top $1,300 an ounce. In 2008, he wrote about mining for the New York Times, and visited another community soon after the price of gold had fallen from $1,000 to $892 an ounce. It was still considered a boom.
The price of gold would have to fall below $500 an ounce to seriously disrupt the rural economy, Friess said.
“It’s is actually very expensive to mine the gold,” Friess said. “This isn’t gold like you dig up nuggets. This is gold where you have open pits, and they dig up sand and they use chemical treatments to extract the gold elements from whatever is there. It’s an expensive process. If it’s not worth mining they will close the mines. And that will be an economic disaster for those areas of the state.”
But if the price of gold falls below that $500 threshold, it could mean trouble for some of the smallest mining communities. If it becomes unprofitable to mine gold, then some of the mines might go away, and take the towns with them.
“If the mines go away, the towns go away. There’s no other purpose to be up there.”
Chris Johnson, the mayor of Elko, doesn’t think his community will ever disappear, but knows firsthand what happens when the price of gold falls below $500 an ounce.
“It was tough during that time,” Johnson said. “Elko definitely had an attitude of, okay, what’s the future of the community?”
Gold recovered and so did the community. He said that the city council has been conservative with money, and has saved much of the recent gold windfall for a rainy day. A prolonged gold bust will test the community, he said, but it won’t kill it.
“It’s not a vibrant economy when you have low gold prices, but it’s not the end of the world either.”