Nevada gold production accounted for more than 79% of total U.S. gold production and approximately 7.2% of global production, according to the report.

Nonetheless, Dobra explained, "Nevada's production declined for the eighth straight year because higher prices allow operators to process lower grades of ore. While lower production levels may seem like bad news in the short term, in the long run it extends the life of ore bodies and enhances the sustainability of the industry."

The Nevada Department of Minerals reported Nevada gold operations mined 5.64 million ounces of gold last year, down slightly from 5.7 million ounces in 2008. Silver production, mostly by-product production in Nevada mines, was 7.2 million ounces in 2009, down from nearly 8 million ounces in 2008.

Because of lower silver production and a decline in silver prices last year, the calculated value of 2009 Nevada silver production dropped from $119 million in 2008 to $105.6 million in 2009. However, Dobra advised that the planned restart of the Coeur-Rochester silver mine near Lovelock this year is expected to reverse the state's decline in silver production.

Copper production last year was reported at 145.7 million pounds from two Nevada mines, down from 175.5 million pounds in 2008.

"Because of renewed production at Quadra Mining's Robinson mine near Ely and Newmont's Phoenix Mine near Battle Mountain, copper production is once again a significant contributor to minerals industry output," Dobra observed. "Copper is the second most important mineral produced in the value of output, although only a little more than one-tenth the value of gold production."

Eoin Treacy's view Mines are depleting assets by definition so it makes economic sense for miners to exploit less profitable seams when prices are high so that they can ensure a cheap cost of production when prices are low and thus extend the life of the mine and the company producing from it.

This tendency to offer less leverage to the gold price as prices rise at least in part accounts for the underperformance of major cap gold miners that dominate the NYSE Arca Goldbugs Index compared to mid-tier companies which offer more leverage to gold prices.

The NYSE Arca Goldbugs Index has sustained a progression of higher reaction lows since late 2008 and found support in the region of the 200-day MA on a number of occasions. It has been ranging mostly below 500 for most of the year, albeit with an upward bias and a sustained move below 430 would be required to question potential for a successful upwards break.