Reinflation is devaluing currencies, Hard Things are going up in value, all excess in Supply will never materialise when prices are going down. Look at Nova Gold they have to put project on hold because of escalating cost. Almost all projects accounted for Supply increase are running late and with CAPEX increased. Reinflation is hitting Miners as well, they will push their prices higher as cost of mine development and production rises.Saturday, December 08, 2007
Commodity Bull is Alive and Well
Reinflation is devaluing currencies, Hard Things are going up in value, all excess in Supply will never materialise when prices are going down. Look at Nova Gold they have to put project on hold because of escalating cost. Almost all projects accounted for Supply increase are running late and with CAPEX increased. Reinflation is hitting Miners as well, they will push their prices higher as cost of mine development and production rises.
Miners can't push their prices higher because they are price takers not price makers. Miners sell their gold into the market, at market prices. The rising costs however, will indirectly keep a floor on the Gold price. However, that floor is currently at around $400 - $500.
ReplyDeleteCheers~
http://financial-matrix.blogspot.com/
Hi,
ReplyDeleteI can not fully agree here, just look at iron ore situation: the reason for consolidation not only cost cut, but old good monopoly play - the more maket share you control, the more pricing power you have. Otherwise Chinese would not be so worried for BHP RIO take over. Rising costs are pushing prices higher. It is uneconomical to produce below curtain price accounted for CAPEX, interest on financing and Risk taken. With volatile prices marginal projects are put on hold again as Nova Gold did and excess Supply will not materialise, which will take out down pressure on price in oversupply situation.
Regards,
Sufiy.