Post by
bogfit on Jul 27, 2021 9:33am
Why we buy producers, or why you can’t make money in metals.
INVESTMENT 101
LEVERAGE:
The price of assets denominated in dollars, such as commodities reflect its strength or weakness.
If the USD falls 1%, we would expect commodities to enjoy a 1% higher price. Although we may gain 1% on our metal asset, we will also pay 1% more for power, food, etc. making it a wash.
However, when the USD falls 1%, historical records indicate on average the earnings of gold producers is 3 times larger, or in our case 3%. Why? Because assuming that production rates, grades, and costs remain the same, the higher price of the metal goes directly to the bottom line.
Interesting enough during this last pull-back, silver producers fell approx.. 25% while silver itself fell only half that amount. Need more data but appears their leverage is about 2X.
b.
Comment by
bogfit on Jul 27, 2021 9:38am
"during this last pull-back, silver producers fell approx.. 25% while silver itself fell only half that amount" Since this is an elementrary primer. I should empathize the fact that levelage acts both ways! b.