Tuesday, June 2, 2009

A Novice Guide To Precious Metals Part II: The Miners

Jeff Nielson
May 30, 2009
In "Part I" of this series, I provided a basic overview of what separates gold and silver from all other commodities, why gold and silver are so attractive today, and dispelled the popular myth that "bullion-ETF's" are the same as owning real, "physical" bullion. In Part II, I will explain why the potential profits from investing in gold and silver miners always exceeds the potential return from bullion, alone.

The obvious starting-point when it comes to a discussion of gold and silver miners is to discuss the basic proposition of "leverage", as it applies to a commodity-producer. Let's make the hypothetical example really simple: a gold miner who can produce an ounce of gold for $500 (its "cash costs"), with the price of gold at $1000/oz. As everyone can see, this miner earns $500 profit on each ounce of gold produced. (more)

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