Gold rates expected to drop another 50 percent
The relationship between gold prices and stock of gold mining entities is a heavily dependent one, however, the fall in stock prices in the past few years has outpaced the fall in prices of the metal considerably. The golden carnage of 2013 has led to the a modest comeback for the precious metal, the prices of gold have increased by a mere ten percent since the start of this year. But is this recovery a temporary glitch or the beginning of a slow increase in the rates of gold.
Most analysts are trying to shed more light on the rate of gold and how it should have been highly correlated to gold miner stocks. Ever since time immemorial , the rates of gold were driven by gold miner stocks, but this relationship is now under scrutiny. A depreciation in the gold prices by 50 percent or an appreciation in the stock prices of miners by approximately 100 percent is required for this relationship to hold it’s ground.
Ultimately, do gold prices influence the stocks of gold mining entities or vice versa? Gold mining analysts conclude that, the price of gold mirrors the supply and the demand of mined gold while the worth of gold mining corporations mirrors the current value of gold that is mined at a future period.
If the above mentioned concepts are accurate then the gold prices should follow the gold mining stock prices rather than vice versa. If the stock prices of gold mining entities reflects the present worth of gold at a future period, then it is safe to expect the future rate of gold to reflect the worth of gold mining companies. The possibility that the link between gold mining company stocks and gold prices has broken down still exists. Or maybe investors have lost faith in the ability of gold mining companies to profitably extract gold and their management performance. Most gold mining entities are facing a ton of problems right now such as, increase in the royalty fees, higher taxes on mining, inadequate financing issues and a decline in the quality of gold ore.
As a matter of fact, the average quality of gold mined has decreased to 1.5 grams for every tonne of gold. Which implies that the world might be running out of easily extractable gold. The world supply of gold might be depleting slowly which could be an extremely dynamic sign for gold prices.
Eventually, the value of gold rests on the future part that this metal will perform in the universal monetary system. Because in reality if gold is becoming more tough to mine the rich will identify some other fancy metal to deck up themselves with and another investment to protect themselves against tail risks and inflation.
However, in the end if gold serves as the only shelter for investors in a market where almost every government is depreciating their currencies, then the gold metal stand to appreciate a lot more than it’s present value. All gold analysts and investors are very eager to watch what the future scenario of gold turns out to be at the universal level.