Mcx Gold Again All Time High possible ???
- Thread starter santhosh2010
- Start date
I'm not a call giver. I saw u traded positionally so got inclined to assist you, honestly speaking positional traders are very rare here.
and sorry for that "call" word i didn't mean that. i just wanted to see your view. because i would like to follow you. in following your views i am learning a lot (patient and trend study,etc)
thank a ton!
You make it seem very obvious and easy that gold is a big time investment. We heard same arguments last time too when gold touched new lows this year.
Let's talk about it.....
Marginal cost of per ounce gold is anywhere to 600$ - 1300$ per ounce, and if you go by the law of economics it does say that non-viable extraction sites will be forced to close resulting to decrease in supply which will increase the rate of the metal in the market.
Now here goes my points against it.
1) Shutting a site in a very short run is not possible, miners will take a chance to bear losses than close the sites and bear heavy consequences of shutting the sites with huge capex and resulting penalties and settling labour payouts. So for most of the companies, they will continue production for say still some 2-3 years before completely shutting down(in case if it stays on average basis 1250 consecutively)
2) Real world economics plays like this.....the price of the commodity is bound to hit its least marginal cost in long run....which is 600$ per ounce resulting in shutting down of least viable sites and at the same time in the process price of the commodity will also go down(airline industry is the perfect example of these where price touched its marginal cost and most of the airliners struggled to manage their costs.) And Gold miners are price takers and not price makers and it will continue to happen in future.
3) In case of diminishing supply, demand side constraints will also grow, its not that demand will rise endlessly for the unyielding yellow metal. Many nations have put restrictions on gold imports and purchases like India and many parts of Europe.
4) Now coming to Indian context, current gold price is supported by huge tax levied by govt and currency depreciation. And one fine day this cushion to the gold price will eventually get taken away when things get settled down. So I will say specially emerging economies are at larger risk who are already paying a lot compared to rest of the world due to imbalance of currencies and mad rush of hoarding gold. When everything will come at par hoarders of the emerging economies who bought at these higher level will be biggest loosers.
Let's talk about it.....
Marginal cost of per ounce gold is anywhere to 600$ - 1300$ per ounce, and if you go by the law of economics it does say that non-viable extraction sites will be forced to close resulting to decrease in supply which will increase the rate of the metal in the market.
Now here goes my points against it.
1) Shutting a site in a very short run is not possible, miners will take a chance to bear losses than close the sites and bear heavy consequences of shutting the sites with huge capex and resulting penalties and settling labour payouts. So for most of the companies, they will continue production for say still some 2-3 years before completely shutting down(in case if it stays on average basis 1250 consecutively)
2) Real world economics plays like this.....the price of the commodity is bound to hit its least marginal cost in long run....which is 600$ per ounce resulting in shutting down of least viable sites and at the same time in the process price of the commodity will also go down(airline industry is the perfect example of these where price touched its marginal cost and most of the airliners struggled to manage their costs.) And Gold miners are price takers and not price makers and it will continue to happen in future.
3) In case of diminishing supply, demand side constraints will also grow, its not that demand will rise endlessly for the unyielding yellow metal. Many nations have put restrictions on gold imports and purchases like India and many parts of Europe.
4) Now coming to Indian context, current gold price is supported by huge tax levied by govt and currency depreciation. And one fine day this cushion to the gold price will eventually get taken away when things get settled down. So I will say specially emerging economies are at larger risk who are already paying a lot compared to rest of the world due to imbalance of currencies and mad rush of hoarding gold. When everything will come at par hoarders of the emerging economies who bought at these higher level will be biggest loosers.
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