Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Gold/Mining/Energy : Gold Price Monitor -- Ignore unavailable to you. Want to Upgrade?

To: Ken Benes who wrote (53435)	5/31/2000 12:01:00 PM
From: Enigma	Respond to of 116947

The difference between widgets and gold is that there's always a market for gold. Not widgets, not oil, but gold Ken. Takes a while to grasp, eh? And maybe the price just isn't going to go up anytime soon?

To: Ken Benes who wrote (53435)	5/31/2000 1:08:00 PM
From: goldsheet	Read Replies (2) \| Respond to of 116947

> Manufacturers of widgets will slow the assembly line if the market is flooded with product and the price commanded for a widget drops. Actually, one does not look at the absolute price, but the relative profit margin. When I was in the telecom industry the price of our product dropped from $300 to $150 per channel in about three years, but our manufacturing cost dropped from $250 to $75, increasing gross margin from $50 to $75 per channel. While no longer dropping, gold has been stuck around $275-300, but cash costs per ounce and total cost have continued to drop over the last year. On average, gold miners can making more money today at $275 gold than a year ago at $275 gold. It's the relative margin, not the absolute price. > It is so fundamental, they teach this principal in introductory economic classes. It is amazing that the producers and their fan clubs cannot master this principal Yes, but once you get past the thereoretical macroeconomic supply/demand stuff, you have to get into the real world of microeconomics of running a business - margins, IRR, capital allocation, financing, etc.. Once you made a decision in 1994 when gold heading to $400 ($500 according to the goldbugs) to spend $US500M on a project that went into production just as gold peaked in early 1996, you just do not slow it down or shut it down. You might have $US40M in annual interest payments to make, and another $50M in depreciation (non-cash expense), not to mention skilled employees that you just don't dump, liabilities to local, federal, and state government, etc.. You just don't walk away from tough situations, you deal with it. > It is amazing that the producers and their fan clubs cannot master this principal Guilty as charged, but I still got my MBA in Finance despite my ignorance.