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Gold/Mining/Energy : Gold Price Monitor

GDXJ 97.81

+0.9%

Nov 19 4:00 PM EST

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To: bobby beara who wrote (7736)	2/20/1998 1:55:00 PM
From: strack	Read Replies (1) of 116762

Why only the physical metal? Consider two investors, "A" & "B". "A" invests in gold bullion at $300/oz. while "B" invests in the stock of a selected producer "C" with total production costs of, say, $250/oz. (implying a "simple" margin of $50/oz. or 20%). Assume, now, that the POG rises to $350/oz. Investor "A" sells his bullion for a profit of about 16.7% - not bad; however, the profits of producer "C", would now have doubled from $50/oz. to $100/oz., its margin increasing from 20% to 40%. Assuming equity market efficiency, does this not imply a potential 100% gain for investor "B"?

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