Assuming the company produces at a constant 31,205 oz per annum, for every US$10 increase in gold price, it will translate to US$310,205 OF REVENUE and roughly US$125,000 of profits,
Simply speaking, the company doesn't need to ramp up production but the profits will skyrocket with the gold price, of cos that is vice versa.
Gold may rally to as high as $1,400 an ounce should risk aversion intensify, according to the top-ranked precious metals forecaster, who dubbed bullion a “superhero” when raising his outlook for 2016.
The metal may remain above $1,200 this quarter and possibly into next as investors seek a haven, Oversea-Chinese Banking Corp. economist Barnabas Gan said in an e-mail to Bloomberg. Singapore-based Gan, who previously saw prices dropping to $950 at the end of the year, revised his outlook in a Feb. 19 report, and now sees a range of $1,000 to $1,150 by the end of 2016.
The precious metal is the best performer among commodities this year as concern about a slowing global growth and slumping oil prices spurred financial-market turmoil and increased speculation that the Federal Reserve will hold off on raising U.S. borrowing costs. As investors piled into bullion-backed funds and producers’ shares jumped, forecasters including Gan have been prompted to rework their outlook for 2016.
“Gold is performing largely as a safe-haven asset given the equity doldrums and overall risk aversion,” Gan said in response to e-mailed questions, laying out his case for changing his forecasts. “Should risk aversion dominate amid intensified global growth headwinds, gold may well rally to as high as $1,400.”
[bGold price: ETF buying surges to 6-year high][/b]
Following another year of heavy ETF outflows in 2015 – 133 tonnes of net redemptions – investors in physical gold-backed ETFs came roaring back in January paying more than $2 billion for roughly 57 tonnes.
In February the buying only accelerated and this week gold bulls stampeded picking up 50 tonnes in just two days.
In a research note Commerzbank points out that it’s “the sharpest two-day inflow since the Greek crisis first flared up in May 2010.”
The purchases equated to roughly six days of global gold mining production, according to the bank and pushed total holdings in the dozens of ETFs listed around the world to 1,665 tonnes, the highest level in nearly a year:
“Since the beginning of February, more gold has flowed into the ETFs than was withdrawn in the whole of last year.
“ETF investors, who are generally regarded as having a longer term horizon, clearly view the current price level as an attractive opportunity to buy. The high ETF purchases should lend further support to the gold price in our opinion.”
Gold shines where uncertainty looms. As global markets try to work through geopolitical and financial concerns, gold stocks have bounced off lows to deliver staggering returns year to date:
Barrick Gold Corp. (TSX:ABX)(NYSE:ABX): Up 81%
Kinross Gold Corporation (TSX:K)(NYSE:KGC): Up 60%
Yamana Gold Inc. (TSX:YRI)(NYSE:AUY): Up 44%
Goldcorp Inc. (TSX:G)(NYSE:GG): Up 36%
The recent gold price rally looks unsustainable and it's time to sell, Societe Generale analysts say, taking an opposite view to rival Deutsche Bank that only last week advocated buying the precious metal.
Gold prices have rallied 20 percent just two months into 2016 as investors seek refuge from the turbulence in developed equities and emerging markets.
The fear is also prompting investors to trim expectations of further interest rate hikes from the U.S. Federal Reserve this year but the reality is likely more upbeat, according to SocGen.
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