Wow Gold $1407 oz Silver $29.21 Panic Panic

middlepuss

lvader wrote: »

An alternative is to invest in mineing companies, a few expamples are Rio Tinto (copper), Fresnillo (Silver & Gold), Lonmin (Platinum & Palladium). As the spot price increases they make more money. Trading costs are much lower.

Yes indeed.

If you buy gold and it goes from $1400 to $1500 you've made a 7% profit.

If it costs a mining company $1300 to dig up an ounce of gold, they make $100 profit @ $1400 but $200 profit @ $1500. So the 7% rise in the gold price gives them a 100% rise in profits - and you'd hope their share price rises commensurately.

So if you think gold will rise you can gear up by buying mining shares. Trouble is, if the gold price falls by $100 your mining company makes zero profit and its share price plummets.

Some mining companies are low cost producers so are less exposed to relatively small movements in the gold price. But before you buy a gold miner, look at their production costs - understand what you're buying.

Jonbvn

middlepuss wrote: »

Some mining companies are low cost producers so are less exposed to relatively small movements in the gold price. But before you buy a gold miner, look at their production costs - understand what you're buying.

Good post! I like Medusa (MML) because of their very low production costs at around $200/oz.

smeagold

middlepuss wrote: »

Yes indeed.

If you buy gold and it goes from $1400 to $1500 you've made a 7% profit.

If it costs a mining company $1300 to dig up an ounce of gold, they make $100 profit @ $1400 but $200 profit @ $1500. So the 7% rise in the gold price gives them a 100% rise in profits - and you'd hope their share price rises commensurately.

So if you think gold will rise you can gear up by buying mining shares. Trouble is, if the gold price falls by $100 your mining company makes zero profit and its share price plummets.

Some mining companies are low cost producers so are less exposed to relatively small movements in the gold price. But before you buy a gold miner, look at their production costs - understand what you're buying.

The average production cost per oz of gold is around $500

lvader

The Silver production costs I've seen are around $6-8, so compared to gold the current spot price of silver has a much bigger profit margin.

sabretoothtigger

Silver only rose this much recently though. Remains to be seen if it can stay this high where as gold even if it fell isnt likely to threaten most gold miners feasibility as it wont likely lose the 1000 mark now

Trouble is, if the gold price falls by $100 your mining company makes zero profit and its share price plummets.

I think the highest I read about is in region of 650 or 700 or 800 say if you want to include rising oil and energy costs. It seems that gold price falls will not likely threaten many miners hence why buying them is probably cheaper then it should be.

All you got to do is estimate future prices to stay above 1000 for years ahead and its fairly certain like you say the miners are going to rake it in, I much prefer this concept to being a retail purchaser of the physical, its less efficent

I've heard 5% quoted as the traditional recommendation for PM holdings in a portfolio. So let's go with £5,000.

I got a bit over 10% I'd much rather invest in food production or something useful if I can. Also I think if one paper currency breaks, they will just use a different one. The chinese seem to like the euro

6022tivo

Why are we still paying VAT (now 20%) on the silver I am investing in......

C_Mababejive

6022tivo wrote: »

Why are we still paying VAT (now 20%) on the silver I am investing in......

You bought physical silver NOW in the UK?

Wow..