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Strategies & Market Trends : Heinz Blasnik- Views You Can Use

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To: zonder who wrote (1960)5/27/2003 11:10:31 AM
From: GraceZ  Read Replies (2) of 4912
 
One would expect supply to effect price, but one would also expect producers to cut production in a low price environment and attempt to ramp up production in a higher price regime. Here's the chart, put that against the long term chart in the POG and you'll see what I mean:

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I would be VERY surprised. Which costs of gold miners would rise in correlation to the price of gold?

The price of gold is a good measure of inflation. Most companies, regardless of what they produce, have costs that are subject to inflation. You have to understand that the miners had been operating in a declining environment for almost 20 years. I would think there is a lot of pent up demand for wage increases and capital equipment which suddenly materializes as the price of what they sell rises.

edit: In any extraction business, different properties have different price points that make them profitable. As price rises you expect production to go up because properties which were idle at a lower price are suddenly worthwhile to bring on line.
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