GLD Equity: Bullion Correlation Strengthening

Marc Elliot of Investec Securities reports that 2013 will be another sideways for all gild equities. Elliot says that as GLD Prices move above $1,600 per ounce, a lot of correlation has appeared among the gold equities.

He says that usually when gold prices fall below $1,600 then there is an excessive margin squeeze on many producers. And these margins don’t open to reflect the movements in gold prices directly.

Currently, the price of gold is mercilessly dwindling because mining companies have not controlled their prices. If they demonstrate their dedication to lowering the mining costs without missing to plan on how not to miss their targets then a positive correlation in the price trend will be realized. Hence, gold companies will fare well if at all the gold prices continued to rise.

You may not believe it but he proposes that gold prices will rise to $1,800 this year because of the investors’ optimism. However, volatility is anticipated because the prices of gold have lately been affected by the dollar.

Instability of gold prices due to dollar fluctuation has been largely contributed to by larger risks facing companies such as inflation, under-delivery, political risk and cost in a market which is risk averse. This has made operational gearing very difficult!

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