Gold and Silver Prices

[philibusters]

I don't know a lot about precious metals prices. I recently purchased a stock, CDE, because I thought its upside was higher than its downside. It a mining company that mainly mines silver, but also some gold. It is not an efficient company compared to other mining companies (for example if they industry average is it costs $15 to mine an ounce of silver, it costs them $17. Thus with silver prices depressed they are actually losing money.

I bought their stock because they are well positioned if precious metal prices recover. Part of the reason they have a bad efficiency ratio is because they spent a lot of money purchasing good assests. Thus if precious metals prices go up there are in a good position because they will have a lot of good holdings. Weighing the bad (they are losing money and if prices don't increase they will continue to lose money) vs. the good (if prices go up they are well positioned to take advantage), it seemed like a good buy.

The problem is I don't have any type of feel for whether the price of precious metals will likely go up or down in the next year or 5 years. I see this as an intermediate move (2 to 5 years) so if prices are not likely to move in the next five years, I made a bad purchase. I purchased the stock at $3.37 per share.

Does anybody have an opinion on what the precious metal market will do in the next year or five.

 

[Tilted]

I don't know a lot about precious metals prices. I recently purchased a stock, CDE, because I thought its upside was higher than its downside. It a mining company that mainly mines silver, but also some gold. It is not an efficient company compared to other mining companies (for example if they industry average is it costs $15 to mine an ounce of silver, it costs them $17. Thus with silver prices depressed they are actually losing money.

It's been a while since I looked at individual miners, so I can't speak with much certainty on this point - but I think that may be a fairly common problem right now with regard to gold rather than silver. The analysts I've heard talking about it have said that the average cost per ounce of production - across all miners, not for a particular miner or two - is now higher than the price of gold.

I bought their stock because they are well positioned if precious metal prices recover. Part of the reason they have a bad efficiency ratio is because they spent a lot of money purchasing good assests. Thus if precious metals prices go up there are in a good position because they will have a lot of good holdings. Weighing the bad (they are losing money and if prices don't increase they will continue to lose money) vs. the good (if prices go up they are well positioned to take advantage), it seemed like a good buy.

The problem is I don't have any type of feel for whether the price of precious metals will likely go up or down in the next year or 5 years. I see this as an intermediate move (2 to 5 years) so if prices are not likely to move in the next five years, I made a bad purchase. I purchased the stock at $3.37 per share.

Does anybody have an opinion on what the precious metal market will do in the next year or five.

To the bolded sentence, no one does. At least, no one has a feel for which there's good reason to think it represents a good sense of what will actually happen. Some are convinced that, e.g. gold will go up during a certain time period. Others are convinced it will go down. They may get lucky and turn out to be right or they may get unlucky and turn out to be wrong. But that's mostly what it is, luck. That's true to some extent with other asset classes, with other investment possibilities. But it's more true with gold and, to a lesser degree, silver. There's little in the way of substantive consideration to be done. Gold moves based on what people think about what other people are going to think about what other people are going to think. There aren't many fundamentals that really matter, that can be anticipated or predicted or whatever (save, maybe, production costs - though there's so much effectively unused gold in existence that even that can't confidently provide a floor). And lately it's been acting fairly counterintuitively, even just based on expectations about what people will think about this development or that one. And gold is, at times, such a heavily levered market that it's especially susceptible to momentum swings triggered by who knows what. Gold has long been a crap shoot. Put your money down, let the dice be thrown, and hope they come up a winner for you.

I'm currently trying to decide if I'm interested in dipping my toes in the gold market. It's had such a horrible few years, but that doesn't necessarily mean it's going back up soon. For now there are other things regarding which I feel like I can do a better job of weighing the risks against the potential rewards. But I used to love Atlantic City, so...

 

[Merlin99]

It's been a while since I looked at individual miners, so I can't speak with much certainty on this point - but I think that may be a fairly common problem right now with regard to gold rather than silver. The analysts I've heard talking about it have said that the average cost per ounce of production - across all miners, not for a particular miner or two - is now higher than the price of gold.



To the bolded sentence, no one does. At least, no one has a feel for which there's good reason to think it represents a good sense of what will actually happen. Some are convinced that, e.g. gold will go up during a certain time period. Others are convinced it will go down. They may get lucky and turn out to be right or they may get unlucky and turn out to be wrong. But that's mostly what it is, luck. That's true to some extent with other asset classes, with other investment possibilities. But it's more true with gold and, to a lesser degree, silver. There's little in the way of substantive consideration to be done. Gold moves based on what people think about what other people are going to think about what other people are going to think. There aren't many fundamentals that really matter, that can be anticipated or predicted or whatever (save, maybe, production costs - though there's so much effectively unused gold in existence that even that can't confidently provide a floor). And lately it's been acting fairly counterintuitively, even just based on expectations about what people will think about this development or that one. And gold is, at times, such a heavily levered market that it's especially susceptible to momentum swings triggered by who knows what. Gold has long been a crap shoot. Put your money down, let the dice be thrown, and hope they come up a winner for you.

I'm currently trying to decide if I'm interested in dipping my toes in the gold market. It's had such a horrible few years, but that doesn't necessarily mean it's going back up soon. For now there are other things regarding which I feel like I can do a better job of weighing the risks against the potential rewards. But I used to love Atlantic City, so...

Kind of an associated question. Acouple of years ago, when the price of gold was about $2000 an ounce, there were a spate of gold mining shows. With the price now about half that, are those shows going to be able to be made?

 

[tommyjo]

It's been a while since I looked at individual miners, so I can't speak with much certainty on this point - but I think that may be a fairly common problem right now with regard to gold rather than silver. The analysts I've heard talking about it have said that the average cost per ounce of production - across all miners, not for a particular miner or two - is now higher than the price of gold.

To the bolded sentence, no one does. At least, no one has a feel for which there's good reason to think it represents a good sense of what will actually happen. Some are convinced that, e.g. gold will go up during a certain time period. Others are convinced it will go down. They may get lucky and turn out to be right or they may get unlucky and turn out to be wrong. But that's mostly what it is, luck. That's true to some extent with other asset classes, with other investment possibilities. But it's more true with gold and, to a lesser degree, silver. There's little in the way of substantive consideration to be done. Gold moves based on what people think about what other people are going to think about what other people are going to think. There aren't many fundamentals that really matter, that can be anticipated or predicted or whatever (save, maybe, production costs - though there's so much effectively unused gold in existence that even that can't confidently provide a floor). And lately it's been acting fairly counterintuitively, even just based on expectations about what people will think about this development or that one. And gold is, at times, such a heavily levered market that it's especially susceptible to momentum swings triggered by who knows what. Gold has long been a crap shoot. Put your money down, let the dice be thrown, and hope they come up a winner for you.

I'm currently trying to decide if I'm interested in dipping my toes in the gold market. It's had such a horrible few years, but that doesn't necessarily mean it's going back up soon. For now there are other things regarding which I feel like I can do a better job of weighing the risks against the potential rewards. But I used to love Atlantic City, so...

An extremely long winded reply that basically says you have no idea.

Gold is a simple thing to understand...honestly it could not possibly be more basic. It is a hedge against abject fear and uncontrolled inflation. It serves no other investment purpose. When abject fear and runaway inflation (or the fear of runaway inflation) are absent, gold prices fall. When an economy is improving, gold prices fall. When the economic outlook is stable, gold prices fall or remain at low levels. Look up the historical prices...you'll see.

Gold today, adjusted for inflation, is worth much less that in was 35 years ago. On a nominal basis it has fallen severely since the highs in 2011.

Gold has very little industrial use (unlike other metals) and no income production component (unlike stocks, bonds, real estate, or business ventures). Just because gold prices go down...does not mean they have to go back up. Oh...and don't forget it is horrendously expensive to store.

Other than all that...it is pretty and it makes chicks happy.

 

[Tilted]

Kind of an associated question. Acouple of years ago, when the price of gold was about $2000 an ounce, there were a spate of gold mining shows. With the price now about half that, are those shows going to be able to be made?

My guess would be that it depends much more on whether there's still enough viewer interest than whether the price of gold remains high enough, at least with gold at or near current levels. If gold fell a lot further, then maybe the shows wouldn't make much sense because the mining operations themselves would be major money losers. But I get the sense that many of those kinds of operations can still break even or make money at these gold prices.

 

[Gilligan]

Other than all that...it is pretty and it makes chicks happy.

ah ha! A clue. (Which is interesting, because I thought you had none of those..but I digress). You dropped me for Larry because he gave you some gold, di'ntcha? Gave me up for some baubles. How shallow.

 

[GWguy]

I bought gold mine stock a while back, and it has done very poorly. Lost about half of what I invested. Recently sold off the remaining shares, doubt I will try it again.

 

[Tilted]

I bought gold mine stock a while back, and it has done very poorly. Lost about half of what I invested. Recently sold off the remaining shares, doubt I will try it again.

Years ago I day-traded Yamana Gold (AUY) for a while, maybe 6 months. It primarily traded in a range from $12 to $15. I checked it a couple of days ago, it was below $2.

 

[Gilligan]

I bought gold mine stock a while back, and it has done very poorly. Lost about half of what I invested. Recently sold off the remaining shares, doubt I will try it again.

I had much the same luck..or worse...after being convinced by a friend to buy shares in some oil royalty holding companies. Most if not all of them had brief runs up but fell off and all of them were eventually de-listed. I stick with just my brass and lead investments now.

 

[GWguy]

I had investments in Silverton (SLW) and Gold Resource Corp (GORO). I invested at $34 and $28 respectively, today they sit at $12.68 and $2.12.

My investor had suggested a fair amount of stock in oil resources back in Feb. Last week I told him to dump the oil stock. I do not see a bright future there for a while if the Iran/Iraq deals go thru. There will be a glut and prices will plummet. If I made an error, no harm done. If it does plummet, I'm now safe.