How does the price of gold affect the price of a gold mining companys stock?
August 20th, 2009 | by admin |
Green Man asked:
Lets say that for one day a gold mining company’s’ stock was not allowed to be traded (so supply and demand of the stock had no play) and at the same time gold went up $300 an ounce. Without anyone having traded the stock… would the price of the stock automatically go up? (because the price of gold is directly related to the profits of the company)
gold prospecting equipment
Lets say that for one day a gold mining company’s’ stock was not allowed to be traded (so supply and demand of the stock had no play) and at the same time gold went up $300 an ounce. Without anyone having traded the stock… would the price of the stock automatically go up? (because the price of gold is directly related to the profits of the company)
gold prospecting equipment
4 Responses to “How does the price of gold affect the price of a gold mining companys stock?”
By gold dredges on Aug 23, 2009 | Reply
I don’t think so, because the buyers and sellers on the market move the stock price. Of course If gold went up by $300 an ounce all in one day the shares would rocket.
If people are speculative about stocks such as gold stocks, what could happen is before the market opens they might set higher limited buying orders causing the stock to open higher than the previous days close.
It’s an Interesting question.
By sluice boxes on Aug 26, 2009 | Reply
stock price is determined by buyers and sellers, no trading, no price change.
value of miner’s reserves would go up
how to evaluate gold miners? One is market cap per ounce. The market capitalization of a company is the number of shares times its price. You divide that by its ounces of production and its ounces of proven and probable reserves, and you see how the company’s data compares to the industry’s weighted averages.
Second, we look at operating cash flow multiples. Take the difference
between the gold price and the cash cost to produce an ounce, multiply that by the company’s production per year, and you get operating cash flow. Divide that into its market capitalization and you get its operating cash flow multiple. We look at that this much the same as one looks at earnings per share multiples in other industries.
By gold mining equipment on Aug 28, 2009 | Reply
In theory, yes.
Evaluating gold miners is tricky, because some of them hedge production. It is possible that a severe rise in price can cause them to lose money due to overhedging or mark2market accounting. The REASON for the price rise would also come into account. If due to a currency issue, it would depend where the mines are located and also other political considerations that would be in play in order to cause a $300 rise in the first place. Inflation can raise their cost of production as much or more than the price rise. Threats of nationalization or civil unrest could be major factors. Lots more issues as well.
By gold dredges on Aug 28, 2009 | Reply
No, nothing happens automatically. Supply and demand, stock trading is the only thing that sets the value of stocks.