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  • #14,561
  • Dec 16, 2011 4:11am Dec 16, 2011 4:11am
Quoting dogbreath
hehehe.....I was born n raised there....4th generation
Interesting. I was also born & raised there, my parents still live there. Don't know about generation number but my lineage is from Swaziland. And we also had a school principal nicknamed "Dogbreath"!
  • #14,562
  • Dec 16, 2011 4:17am Dec 16, 2011 4:17am
Quoting AaronWard
One item I find curious. The cost of producing an additional ounce of gold is around 600, and all in it is still less that 800. Currently the price of gold is twice that. How does one reconcile the discrepancy between the cost of supply one additional ounce and the current price of gold?

http://www.miningweekly.com/article/...old-2009-03-16

why would a mine that goes through all of the trouble time effort and expense, to dig up the gold, then sell it for the same price it costs them to dig up?

Profit Margin.
  • #14,563
  • Dec 16, 2011 4:23am Dec 16, 2011 4:23am
Quoting Goldmansacks
why would a mine that goes through all of the trouble time effort and expense, to dig up the gold, then sell it for the same price it costs them to dig up?
Hilarious. As if the cost of finite resources (as in limited to this century at CURRENT production rates) is determined by the cost to mine...

Ever hear of the rule of 70? If you can calculate the pace at which global population can double at the current rate of population growth, it doesn't take much to imagine how many people in India and China will be needing this limited resource moving forward.

According to your notion of production cost, pretty much every commodity in existence would sell for a fraction of its price and every capitalist, even half witted capitalists, in the world would hoard.

Besides, how much gold is getting snapped up before it's sold on the open market?

Central banks and China have been ramping up buying - that's for sure.

Production costs don't determine demand. Especially when a commodity is in limited quantity.

This argument is even stronger for silver, but works just fine for gold.
  • #14,564
  • Dec 16, 2011 4:28am Dec 16, 2011 4:28am
This is just for production. You must add distribution and administrative costs in there. And then "the irrational exuberance" of markets participants.



Quoting AaronWard
One item I find curious. The cost of producing an additional ounce of gold is around 600, and all in it is still less that 800. Currently the price of gold is twice that. How does one reconcile the discrepancy between the cost of supply one additional ounce and the current price of gold?

http://www.miningweekly.com/article/...old-2009-03-16
Patience is magic
  • #14,565
  • Dec 16, 2011 4:39am Dec 16, 2011 4:39am
Quoting Wheels
Hilarious. As if the cost of finite resources (as in limited to this century at CURRENT production rates) is determined by the cost to mine...

Ever hear of the rule of 70? If you can calculate the pace at which global population can double at the current rate of population growth, it doesn't take much to imagine how many people in India and China will be needing this limited resource moving forward.

According to your notion of production cost, pretty much every commodity in existence would sell for a fraction of its price and every capitalist,...

.......Sorry Wheels I do not get what you mean dude? are you talking to me?

I do not think production costs determine demand, not at all that would be nuts.

All I was saying was, that nothing is sold for the price it costs to produce... or acquire, why would it be? unless you were running a non profit organisation with zero overheads?

A mine would most likely keep its gold, rather than sell it for less than it cost to mine it (most of the time) unless they were on the road to going broke very soon.

This accounts for some of the difference in price of what it costs to mine, and what the price of gold is... which was the question asked...

I am with you on this one, especially with Silver 2029.

ps, yep heard of , and use the rule of 70
  • #14,566
  • Dec 16, 2011 4:41am Dec 16, 2011 4:41am
Ok.

profit margin is usually about 10% but why not go for 20%. So about 1000 an ounce.

The cost is around 600. The additional 200 I added on covers all the other costs such as administration. Irrational exuberance comes and goes. When it goes, prices crash.

As regards the rule of 70...No... is it something like the world population doubles every 70 years? How long does it take to double the amount of gold in human hands? Mining technologies are getting better and we are discovering new sources of gold ore.

The law of supply and demand... supply and demand work together to determine cost. Gold has low elasticity of supply, so typically it lags behind demand. However supply always catches up, exceeds demand and then causes the price to tumble.

Certainly the supply of gold is limited, but so is the supply of copper. It seems like a reasonable assumption that there is still more gold in the ground than in the hands of people.
Kill the ego, or it will kill the mission.
  • #14,567
  • Edited 4:59am Dec 16, 2011 4:46am | Edited 4:59am
Any one long Aussie? Looking promising ahead of NY session.
Went long 1.0018. 20 pips stop. First and last trade this week.
Patience is magic
  • #14,568
  • Dec 16, 2011 4:53am Dec 16, 2011 4:53am
Quoting AaronWard
How does one reconcile the discrepancy between the cost of supply one additional ounce and the current price of gold?
With regard to markups on purchased goods, let me give an example. A pickup bumper costs the Tier 1 manufacturer $38 to produce a full assembly, they sell that to the OEM for $130. OEM then sells that aftermarket for $600. Those are real #'s, now apply that to GOLD... about the price of the DOW.
  • #14,569
  • Dec 16, 2011 5:06am Dec 16, 2011 5:06am
Quoting Sreym33
With regard to markups on purchased goods, let me give an example. A pickup bumper costs the Tier 1 manufacturer $38 to produce a full assembly, they sell that to the OEM for $130. OEM then sells that aftermarket for $600. Those are real #'s, now apply that to GOLD... about the price of the DOW.
Not so many years ago I ran a wholesale shop. I bought from the factory, imported things myself and sold wholesale and retail business so I understand market structure.

Working backwards, I would conclude that if manufacturing market structure were the same as that of gold, then when I buy at 1600 an ounce I am paying retail. I should be able to go out and buy at 1300 or even 900 if I have a decent order size. However I really don't think that the profit structure of gold is the same. Mark up is very small by comparison to say, toy guns.
Kill the ego, or it will kill the mission.
  • #14,570
  • Dec 16, 2011 5:20am Dec 16, 2011 5:20am
Gold,
go above the 1600?Or we can make a short order .pe 1570?
  • #14,571
  • Dec 16, 2011 5:27am Dec 16, 2011 5:27am
Quoting muntu ntu
Any one long Aussie? Looking promising ahead of NY session.
Went long 1.0018. 20 pips stop. First and last trade this week.

Long AUD, NZD, GBP, JPY and XAU (1572)
I have no enemy; I make Incautiousness my Enemy.
  • #14,572
  • Dec 16, 2011 5:30am Dec 16, 2011 5:30am
bounce up from 1593 is noted, lets see we NY makes a stronger attempt at the 1605-15 area .
1668
1605-15
1537-41
  • #14,573
  • Dec 16, 2011 5:31am Dec 16, 2011 5:31am
Quoting muntu ntu
This is just for production. You must add distribution and administrative costs in there. And then "the irrational exuberance" of markets participants.
Exactly.

Which has a way of catching up. See Nasdaq 2000.
  • #14,574
  • Dec 16, 2011 5:51am Dec 16, 2011 5:51am
If the mines were making money at $400 then imagine $1600, Multiple earnings!

BTW, Indian mines which were closed due to losses at $300 - $400 per ounce are going to reopen soon according to one news link.

http://www.bbc.co.uk/news/business-16145737
  • #14,575
  • Dec 16, 2011 6:09am Dec 16, 2011 6:09am
Quoting AaronWard
Ok.

profit margin is usually about 10% but why not go for 20%. So about 1000 an ounce.

The cost is around 600. The additional 200 I added on covers all the other costs such as administration.

As regards the rule of 70...No... is it something like the world population doubles every 70 years? How long does it take to double the amount of gold in human hands? Mining technologies are getting better and we are discovering new sources of gold ore.

The law of supply and demand... supply and demand work together to determine cost....
...


but from a miners point of view it is not just the cost of production it is also the cost of +overheads (plus the cost of covering their hedges)

also

Hmmm I thought that the average for the past 10 years or so gross profit margin for most big mines was between 35%- 55%



Rule of 70 (or 72 but who is counting)

One of the uses is that you can calculate doubling time by dividing the number 70 by the percentage growth rate (only if you have a constant rate of growth) so say 1.3% a year and you want to calculate doubling time then you go 70/1.3=53.8 years doubling time.


noteue inpart to the price of gold rising, the miners have indeed started to utilise technology and are going after the harder to reach gold and the lower grade/more difficult to process ores ( they have done so as it is now viable,or should I say viable for now,with the Gold price higher, but peak oil will mean higher priced oil eventually, which will mean less viable mining) anyway this new tech mining and lower grade mining has actually driven up costs a fair bit also since 2000 (pretty much doubling them)

Exponential increasing demand and exponential less supply will lead over the longterm to price rise..with Gold you cannot help but wonder... a thought experiment..at what point does the cost of mining become too great? at which point, you could argue that if the price of an ounce of Gold went up to $5000=$20,000 per Ounce then the miners would be able to excavate ever more complex ores, and harder to reach low grade gold... but at somepoint either due to oil, or due to mission impossible gold mining, there has to be a line drawn, or it will simply reach a point where it has all been dug up... at that point what happens to the price of gold? does it become ever rarer? ever more expensive? or would people have lost their love affair with gold far before the gold levels ever reach these levels? (Rhodium)

Also interesting to note is that Silver is pretty much a free byproduct of Copper mining, and the price discrepancy between Silvers price and mining costs give Silver mining an even larger profit margin than that of Gold....(45-75% ave)

The cost of something and its value and its worth are like chalk and cheese and turd.

The value of any commodity, ... to the person who possesses it, and who means not to use or consume it himself, but to exchange it for other commodities, is equal to the quantity of labour which it enables him to purchase or command. Labour, therefore, is the real measure of the exchangeable value of all commodities


PS AND OF COURSE AS WE ALL KNOW, AND MANY HAVE POINTED OUT, THERE OTHER ANSWER OF COURSE IS MARKET SPECULATORS.
  • #14,576
  • Dec 16, 2011 6:21am Dec 16, 2011 6:21am
wow, see this chart, price action so similar for 3 days at a particular time of the day, so according to this 2 - 3 hours from now would be a good time to go long?

But then again who knows


Attached Image (click to enlarge)
Click to Enlarge Name: gold (1).gif Size: 16 KB
  • #14,577
  • Dec 16, 2011 6:40am Dec 16, 2011 6:40am
Quoting Goldmansacks
...


but from a miners point of view it is not just the cost of production it is also the cost of +overheads (plus the cost of covering their hedges)

also

Hmmm I thought that the average for the past 10 years or so gross profit margin for most big mines was between 35%- 55%



Rule of 70 (or 72 but who is counting)

One of the uses is that you can calculate doubling time by dividing the number 70 by the percentage growth rate (only if you have a constant rate of growth) so say 1.3% a year and you want to calculate doubling...
ah, I think of the rule of 70 as the rule of 7. I just don't like to count past ten.

What happens when we have mined all the gold in the world? I am not sure. I know people have been worrying about this when it comes to oil for some time now... but strangely we keep finding more oil. Obviously there is a limit somewhere... but probably we are not even near it yet. I iamgine the companies know about a lot more gold than they are reporting, and probably they don't even know the half of it yet.
Kill the ego, or it will kill the mission.
  • #14,578
  • Dec 16, 2011 6:45am Dec 16, 2011 6:45am
There is also the fact that almost all the Gold ever mined is still here.

Crude Oil is here today, gone tomorrow.
  • #14,579
  • Dec 16, 2011 6:47am Dec 16, 2011 6:47am
Quoting AaronWard
I know people have been worrying about this when it comes to oil for some time now... but strangely we keep finding more oil. Obviously there is a limit somewhere... but probably we are not even near it yet.
I posted a really good video before on oil and commodities in general from Chris Martenson. The post was on pg 928 of this thread, post #13908. I think its a must see if anyone missed it.
  • #14,580
  • Dec 16, 2011 6:57am Dec 16, 2011 6:57am
So we have a butterfly on D1 + hit the bottom trendline + morning star forming on daily...

Technically is there any doubt ?
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