commodity trading giant trafigura reports fourfold half year net profit increase | kitco news

commodity trading giant trafigura reports fourfold half year net profit increase | kitco news

(Kitco News) - Trafigura Group, one of the worlds leading independent commodity trading companies, reported Thursday that for the six-month period ended 31 March 2021, the companys revenue rose 19 percent to USD98.4 billion from the first half of 2020 as a result of increased traded volumes and higher commodity prices.

The company said that its gross profit of USD4.3 billion was 54 percent higher. The even stronger rise in net profit to USD2.1 billion from USD0.5 billion in the same period last year in part reflected stabilisation of the groups industrial assets, which had negatively impacted results in the previous year, combined with a very strong trading performance. EBITDA was USD3.7 billion, a 53 percent increase from a year ago, the company noted.

Trafigura said that its both principal trading divisions, Oil and Petroleum Products and Metals and Minerals, showed increased trading volumes, higher margins and larger gross profit. Gross profit margin rose to 4.3 percent from 3.8 percent when compared to the same period last year.

The company pointed out that market conditions, driven in large part by the economic recovery, underlined the need for reliable service providers such as Trafigura with the risk management skills, global network, physical assets and financial capacity to help customers navigate these markets.

Founded in 1993, Trafigura is one of the largest physical commodities trading groups in the world. Trafigura sources, stores, transports and delivers a range of raw materials (including oil and refined products and metals and minerals) to clients around the world and has recently established a power and renewables trading division.

The company also has a majority ownership in global zinc and lead producer Nyrstar which has mining, smelting and other operations located in Europe, Americas and Australia; a significant shareholding in global oil products storage and distribution company Puma Energy; global terminals, warehousing and logistics operator Impala Terminals; Trafigura's Mining Group; and Galena Asset Management.

how to trade gold: strategies and tips for 2021

how to trade gold: strategies and tips for 2021

Trading Gold should be a natural part of trading Forex. Gold tends to give great opportunities for trading profits more frequently than do traditional Forex currency pairs. Traders with only a few hundred or thousand dollars can trade Gold online most cost-effectively usingForex / CFD brokers offering trading in Gold.Profitable Gold trading is best achieved by applying technical analysis methods, possibly filtered by fundamental analysis, the details of which are outlined below with supporting historical price data.

There are several ways to invest or trade in Gold. Investing in Gold means buying and holding for a long period of time, meaning months or years. Trading in Gold means both buying and selling several times within a shorter period, such as a few days, hours, or even minutes.

You can invest in Gold with just a few hundred U.S. Dollars by buying physical Gold in the form of coins or nuggets or by buying small amounts of shares in Gold bullion held in secure vaults. However, these methods are not practical for trading as they are slow and do not give an ability to sell short. Also, Gold coins do not directly mirror the value of Gold, as they are marked up at sale. Holding physical Gold as an investment can also involve problems of proof and storage.

Recent market movements have created excellent opportunities for gold traders. Trade gold with a top-rated broker: Trade Now! Trade Now! Trade Now! New to trading? You can trade gold on a demo account to test your strategies and gain the skills you need to make profitable trades.

The ideal option for Gold traders is to trade Gold options or futures which represent real Gold through a major, regulated exchange. However, this requires a deposit of at least $5,000 with a futures brokerage, because the smallest Gold futures contract represents just over 33 ounces of Gold and buying or selling only a single contract will require this much margin to support the trade.

An alternative solution is to trade shares in an ETF (exchange traded fund) which owns Gold and whose price fluctuations will closely mirror fluctuations in the price of Gold itself. The best example of such an ETF is the SPDR Gold Trust. However, this requires opening an account with a brokerage offering direct trading in stocks and shares. Such stockbrokers usually require minimum deposits of several thousand U.S. Dollars and charge sizable minimum commissions or spreads on every trade. One share in the SPDR Gold Trust will cost you approximately one tenth of the value of an ounce of Gold priced in U.S. Dollars, so this is also going to be an impracticably expensive Gold trading method for most people who want to make money trading Gold with under $5,000, because it is hard to get maximum leverage higher than 2 to 1.

Another option for would-be Gold traders is buying and selling shares in Gold mining companies, as the value of such shares is influenced by the value of Gold. However, this also involves the same difficulties of speed, costs, and minimum deposit required, and has the added drawback that the value of Gold is just one of several factors driving the prices of mining shares.

This leaves one remaining method which is fast, easy, practical and cost-effective for anyone wanting to spend just a few hundred or thousand dollars trading Gold: opening an account witha Forex / CFD brokerage offering trading in spot Gold (the actual price of Gold per ounce). Most Forex brokers offer trading in spot Gold priced in U.S. Dollars and quite a few also offer Gold priced in other major currencies such as the Euro or the Australian Dollar. Almost every Forex / CFD broker offering Gold allows trades as small as 10 ounces of Gold and a few even go as low as 1 ounce. With maximum leverage on Gold trading at 20 to 1 in the European Union and at much higher levels applying to brokers outside the European Union, it has become possible to trade Gold both short and long with a deposit only $100 at many Forex / CFD brokers.

Trading Gold through a Forex / CFD brokerage can have two possible disadvantages which you should be aware of. The spreads and commissions charged may be overly high, but there are plenty of brokers which make a reasonable offering so you can avoid that. A potentially bigger problem (unless you are only day trading) is that brokers will usually charge a fee for every day you have an open trade past 5pm New York time, unless you open an Islamic trading account. This means that if you are keeping a trade open for many days, or even for weeks or months, you need to be sure the trade is doing well enough to justify this cost. Some brokers publish these fees, which can change day to day, on their website. It is usually described as swap, tom/next, or overnight financing fee. If your broker does not publish it on their website, you should be able to find the current rates within their trading platform. In the MetaTrader 4 trading platform, you can find a rate by right-clicking in the Market Watch section on the trading symbol you want to check (e.g. XAU/USD) and choosing properties. Usually, a different rate will be applied to long or short positions. Rarely, the rate may be negative meaning you will get paid for holding a position overnight, but this is very unlikely to happen to Gold.

Gold is priced mostly in U.S. Dollars, but until 1976, the value of the U.S. Dollar was based fully or partially upon the value of Gold: the U.S. Dollar was pegged to Gold. This means that Gold trading as we know it has only really been going since 1976. Many traders get emotional about Gold. It is a natural human emotion to get excited about this shiny and very expensive precious metal which we are used to seeing in expensive jewelry, but traders should view Gold just as a commodity like any other. Traders must think about the price fluctuations, not the asset itself, to make good trading decisions.

A good reason to trade Gold is that its price tends to fluctuate with greater volatility and force than traditional Forex currency pairs such as EUR/USD. For example, major currency pairs often fall or rise by only 8% or so over a year, while the price of Gold has sometimes risen by 100% within only a few months. Even though the cost of trading Gold in terms of spread and commission is proportionately greater than it is in Forex currency pairs, this bigger price movement still tends to make it more rewarding in terms of overall profit. For example, the cost of trading EUR/USD is usually less than 0.01% of the position size, while the cost of trading spot Gold is typically nearly 0.02% - but who cares when the potential profit in trading Gold can be ten times what it will be in trading EUR/USD?

Deciding upon the best Gold trading strategy or strategies to use requires you to consider the cases for trading Gold using fundamental or technical analysis, or a combination of both. Lets consider the basis of such strategies and how they have performed over recent decades to help you make that decision.

Unlike stocks and shares, or a valuable commodity such as crude oil, Gold has very little intrinsic value as it has few practical uses. However, it is rare, and humans are attracted to it and have attributed value to it by consensus. It is impossible to measure minor fluctuations in that human perception from day to day, so in this sense, fundamental analysis is of limited value.

Another aspect of Gold which differentiates it from fiat currencies such as the U.S. Dollar is that its supply is limited. This should mean that a limited supply of Gold can be taken for granted. A problem with this analysis is that almost all the worlds known Gold is held by banks and governments, but nobody knows for sure exactly how much there is. It seems that the large banks, who have colluded for years to fix the price of Gold by means of a twice daily Gold fix, are able to manipulate perceptions of supply and demand.

The U.S. has not seen historically high annual rates of inflation, defined as a rate greater than 6%, since the early 1980s. The U.S. suffered from high inflation during the late 1970s and early 1980s, and the price of Gold rose dramatically during this period. There was a strong correlation between Gold and inflation over this time, but when inflation rose again during the late 1980s the price of Gold fell.

The bottom line is that the price of Gold may be likely to rise when inflation reaches an unusually high level, and there is a small positive correlation between the monthly change in the Gold price and the monthly U.S. inflation rate over the entire period from 1976 to 2019. The correlation coefficient between the two was 17.24%, with 100% indicating perfect correlation and 0% indicating no correlation at all. This means that it is probably wise to only expect Gold to rise strongly when inflation reaches an unusually high rate, but it is also reasonable to be more bullish on Gold when inflation is rising and more bearish when inflation in falling.

Economic crisis or instability is difficult to measure objectively. However, there can be little doubt that a country entering a major economic crisis tends to see the relative value of its currency depreciate. Additionally, the worst economic crisis in the U.S.A. in recent decades occurred during the 1970s, and this was a period during which the price of Gold in U.S. Dollars increased dramatically.

More recent evidence that Gold tends to rise during a period of serious economic crisis appeared in 2020 as the coronavirus pandemic hit the U.S.A. and other western nations starting in February. From March to July 2020, the price of Gold in U.S. Dollars increased by slightly less than 23%, from $1,586 to $1,948, exceeding the previous all-time high price of $1,921 made by Gold in 2011.

As Gold is priced in U.S. Dollars, you would expect the price of Gold in Dollars to be very strongly positively correlated with the U.S. Dollar Index, which measures the fluctuation in the relative value of the U.S. Dollar against a volume-weighted basket of other currencies. A measurement of the correlation coefficient of all the monthly price changes in Gold and the U.S. Dollar Index from 1976 to 2019 shows a minor positive correlation of approximately 25.23%.

Considering we are measuring the price of Gold with the U.S. Dollar, this correlation is not very strong, but may have a use within technical analysis, which will be discussed later within this article.

As Gold is believed by many to be a store of value with a finite supply, while fiat currencies can be debased or artificially inflated by the central banks and governments which control them, it can be argued that the price of Gold in a fiat currency such as the U.S. Dollar will be bound to rise when the fiat currency is being debased. Indicators for the debasement of a currency include high inflation, which we have already discussed, and negative real interest rates. A currency has a negative real interest rate when its inflation rate is higher than its interest rate, because the currency is depreciating in value by more than it pays in interest, so depositors of that currency make a net loss over time.

The problem we face here is that the U.S. Dollar has suffered a negative real interest rate only twice since 1976: during a very brief period in the late 1970s, and then again during 2018 and 2019. This means that we dont have a long enough sample to make a statistically meaningful analysis of the correlation between Gold and a negative interest rate, but it is true that the price of Gold in U.S. Dollars broadly rose during these periods, so it would seem possible that there is a positive correlation.

The correlation between the price of Gold and the U.S. interest rate could also be examined, but as the interest rate tends to be highly correlated with the inflation rate, we effectively already covered it.

Seasonality is a form of fundamental analysis which is based upon a theory that demand for an asset such as Gold tends to peak or ebb with the seasons of the year. For example, the price of natural gas would tend to rise during the winter in the northern hemisphere as cold weather brings more demand. It is hard to see the same logic applying to Gold, but the table below shows that there have been certain months of the year where the price of Gold has tended to either outperform or underperform its average. I do not believe the concept of seasonality applies well to trading Gold, but I present the data anyway. From 2001 to 2019, the price of Gold rose in 56% of months. The percentages of calendar months during this period when Gold rose are shown below:

The precious metal has historically shown a tendency to rise in price during periods of unusually high inflation, severe economic crisis, or negative real interest rates. Over the long term, Gold has not shown any meaningful positive or negative correlation with stock markets.

On a more micro level, it is often true that when markets are in risk off mode, money tends to flow into the Japanese Yen, Swiss Franc, and Gold. Therefore, Gold traders can learn to spot risk off sentiment and look to enter long Gold trades at these times.

Technical analysis is the art of determining whether future price movements can be predicted from past price movements. Here we will look back at whether movements in the price of Gold over recent decades have been able to tell us anything useful.

Gold has shown a long bias since 1976. Its price has risen over 51% of months, and the average month has seen a price rise of 0.55%. The median monthly price change over this period was a rise of 0.07%. These statistics suggest that Gold, as a theoretically finite store or value, may tend to rise against fiat currencies. If true, this suggests that looking for long trades pays off more reliably than short trades. It seems logical that as fiat currencies suffer from inflation while real assets such as Gold and stocks do not, real assets like Gold and stocks will tend to rise in value over time.

Gold, like most major liquid speculative assets, tends to trend. This means that one of the best technical analysis methods you can use here is defining whether Gold is in a trend or not, and then trading in the direction of the trend.

Gold is a commodity, prone to strong price movements. It is well known that one of the best trading strategies for commodities is to trade breakouts in the direction of the long-term trend. Lets check the historical data and see how well trend trading Gold has worked using two different methods.

The first strategy involves trading breakouts. Lets say that when the monthly closing price of Gold is the highest it has been in six months, that is a bullish breakout and we would take a long trade. Conversely, when the monthly closing price is the lowest it has been in 6 months, that is a bearish breakout and we would take a short trade. I will call this Breakout Strategy.

The second strategy is also a trend trading strategy, but less of a breakout strategy: it enters long when a monthly close is higher than the closing price six months ago, or short where lower. I will call this Higher/Lower Strategy.

Both strategies have performed positively over almost half a century, in both long and short trades, with the breakout strategy performing considerably better. It seems clear that the best technical trading strategy for Gold is to trade 6-month price breakouts, and that trading with the 6-month trend even when the price is not making new highs or lows has also worked quite well.

These back-test results are very strong. It is not easy to find a trading strategy which would have performed as well as this over the same period using typical Forex currency pairs, which is a good reason why you should trade Gold if you are going to trade Forex.

Dont forget that Forex / CFD brokers will usually charge you a fee to keep a trade open overnight if you do not have an Islamic account. When you are trend trading and holding trades for weeks or months, this can eat away at the profit of your trade. This is a reason why you might want to trade with the trend but exit the trade after it stops going in your favor for a few days, or even day trade Gold in the direction of the trend. When day traders close their trades before 5pm New York time, they pay no overnight swap fees.

One way to try to time entries to exploit the multi-month trend is to wait for some kind of retracement on a shorter time frame such as the daily time frame, and then when a new day closes in the direction of the trend and makes a higher close than the closes of the last two days in an uptrend, for example, you have a shorter-term entry signal to use.

Volatility in trading means how much the price of something fluctuates. You can use average price movement, which we call average volatility or average true range, to determine better trade entry points, because if volatility is relatively high today, it is likely to also be relatively high tomorrow, suggesting a stronger movement in your favor is more likely. Volatility is best measured using an indicator called Average True Range (ATR) which is available in almost every trading platform or charting software package.

For example, suppose that the price of Gold is closing today at a 6-month high price. We have already shown that there has been an edge in trading such long-term breakouts in the Gold price. If you switch on the ATR indicator on your daily chart and set it to the last 15 days, it will show you by how much the Gold price has moved per day on average over the last 15 days. If todays price movement is significantly higher than the value shown by the ATR indicator, that means that the price is breaking out to new highs on above-average volatility. This means that tomorrow it is more likely to rise further than usual, as the volatility is above average.

We can demonstrate this by looking at some historical data of the price of spot Gold from 2001 to 2019. Lets compare the days when the price closed at a 100-day high or low price, see whether the price continued in the same direction over the next, and by how much, broken down by how strong the volatility was as measured by the 15-day ATR indicator.

The historical data shows that during this period, more profitable trades were triggered when the price of Gold moved in one day by more than the 15-day average daily price movement. On average, where the days price movement was above its 15-day ATR on a breakout, it closed by a further 81 cents in the direction of the breakout the next day. Where the days price movement was below its 15-day ATR on a breakout, it only made a further 51 cents the next day.

Gold is very suitable for day traders. One advantage in day trading Gold is avoiding the cost of overnight swaps, which can be relatively large at many Gold brokers. The main disadvantage is that the spread plus commission for trading Gold is higher than in the major Forex currency pairs, but this is compensated for by the higher average price movement in Gold.

The data show that the price of Gold tends to move the most on average between Noon and 8pm London time, roughly corresponding to the hours when markets are open in eastern and central U.S.A. This suggests that the best time of day to trade Gold, whether as Gold options, Gold futures, spot Gold, or XAU/USD is from Noon to 8pm London time. This is probably true because the major Gold market opening times are within this period.

Trading gold can be profitable, especially long trades as the price of Gold in U.S. Dollars has tended to rise over recent years. Gold has seen several periods of spectacular price gains which has given traders an opportunity to profit from the precious metal.

Gold trades 23 hours a day on weekdays, as the main CME Globex exchange upon which gold is traded is closed only between 4pm and 5pm U.S. central time. Most Forex / CFD brokers allow you to trade gold at the same time as the CME Globex exchange is open.

You can day trade Gold with almost any Forex broker, although be aware the spread on Gold is always larger than it is on major Forex currency pairs, so you may need to be more careful about choosing the very best trade opportunities to be profitable.

For most trading styles, the best time to trade is at times of greatest market liquidity. The greatest liquidity in the Forex market tends to arise during the overlap between London and New York business hours, which occurs on weekdays between 9:30am and 1pm New York time.

Adam Lemon began his role at DailyForex in 2013 when he was brought in as an in-house Chief Analyst. Adam trades Forex, stocks and other instruments in his own account. Adam believes that it is very possible for retail traders/investors to secure a positive return over time provided they limit their risks, follow trends, and persevere through short-term losing streaks provided only reputable brokerages are used. He has previously worked within financial markets over a 12-year period, including 6 years with Merrill Lynch. Learn more from Adam in his free lessons at FX Academy

Please make sure your comments are appropriate and that they do not promote services or products, political parties, campaign material or ballot propositions. Comments that contain abusive, vulgar, offensive, threatening or harassing language, or personal attacks of any kind will be deleted. Comments including inappropriate will also be removed.

Please make sure your comments are appropriate and that they do not promote services or products, political parties, campaign material or ballot propositions. Comments that contain abusive, vulgar, offensive, threatening or harassing language, or personal attacks of any kind will be deleted. Comments including inappropriate will also be removed.

Please make sure your comments are appropriate and that they do not promote services or products, political parties, campaign material or ballot propositions. Comments that contain abusive, vulgar, offensive, threatening or harassing language, or personal attacks of any kind will be deleted. Comments including inappropriate will also be removed.

Please make sure your comments are appropriate and that they do not promote services or products, political parties, campaign material or ballot propositions. Comments that contain abusive, vulgar, offensive, threatening or harassing language, or personal attacks of any kind will be deleted. Comments including inappropriate will also be removed.

top gold miners record decreased all-in sustaining costs in q3'20 | s&p global market intelligence

top gold miners record decreased all-in sustaining costs in q3'20 | s&p global market intelligence

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Thank you for your interest in S&P Global Market Intelligence! We noticed you've identified yourself as a student. Through existing partnerships with academic institutions around the globe, it's likely you already have access to our resources. Please contact your professors, library, or administrative staff to receive your student login.

At this time we are unable to offer free trials or product demonstrations directly to students. If you discover that our solutions are not available to you, we encourage you to advocate at your university for a best-in-class learning experience that will help you long after you've completed your degree. We apologize for any inconvenience this may cause.

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All-in sustaining costs dropped for nine of the 15 larger gold producers in the third quarter, according to an analysis by S&P Global Market Intelligence that assessed companies with 2019 attributable gold production exceeding 500,000 ounces.

The median all-in sustaining cost, or AISC, decreased 2.6% to $966 per ounce of gold across the group as compared to the previous quarter, while the weighted-average mean dipped 1.5% to $990/oz. Costs increased in the second quarter, with the weighted-average mean up 2.5% to $987/oz.

Among the top gold miners, Centerra Gold Inc.'s AISC fell the most, dropping 34.3% to $528/oz quarter over quarter. In reporting third-quarter earnings, the Canada-based company cited increased gold prices, lower diesel prices and currency devaluations as working in its favor.

Mining companies with significant cost increases in the September quarter included Evolution Mining Ltd., Kirkland Lake Gold Ltd. and Newcrest Mining Ltd., with AISC rising over the second quarter by 19.7%, 18% and 11.6%, respectively, to $857/oz, $886/oz and $980/oz.

The median profit margin for the group was 48.3%, and the weighted-average mean was 43.8%, according to the analysis. Centerra had the highest profit margin at 70.8%. Harmony Gold Mining Co. Ltd. recorded the lowest profit margin at 21%. South Africa-based Harmony Gold completed a $300 million acquisition of mining assets in late September.

Balance sheet strength has driven many gold miners to lift dividends as they look to share free cash flow with investors. Newmont increased its dividend by 60% in the third quarter, Agnico Eagle raised its dividend by 75%, and Kirkland Lake boosted its dividend by 50%.

Gold production among larger gold miners rebounded significantly in the third quarter after shutdowns related to the COVID-19 health crisis earlier in the year. The five largest gold producers saw output increase 10% in the third quarter over the second quarter, according to a recent Market Intelligence research report.

why gold matters: everything you need to know

why gold matters: everything you need to know

Gold. It's shiny, metallic, and melts easily into bars, coins, or jewelry. It doesn't rust, corrode, or decay. Gold is... well, golden. But why is gold so valuable, both in our mind's eye and in reality in terms of a global store of value and medium of exchange? Why is silver relegated to a distant second place, and what about poor old copper, which shares many of the same physical attributes as gold? Join us as we try to figure out the answers to these questions, and much more.

The main problem with gold is that, unlike other commodities such as oil or wheat, it does not get used up or consumed. Once gold is mined, it stays in the world. A barrel of oil, on the other hand, is turned into gas and other products that are expended in your car's gas tank or an airplane's jet engines. Grains are consumed in the food we and our animals eat. Gold, on the other hand, is turned into jewelry, used in art, stored in ingots locked away in vaults, and put to a variety of other uses. Regardless of gold's final destination, its chemical composition is such that the precious metalcannot be used up - it is permanent.

Because of this, the supply/demand argument that can be made for commodities like oil and grains, etc, doesn't holdso well for gold. In other words, the supply will only go up over time, even if demand for the metal dries up.

Like no other commodity, gold has held the fascination of human societies since the beginning of recorded time. Empires and kingdoms were built and destroyed over gold and mercantilism. As societies developed, gold was universally accepted as a satisfactory form of payment. In short, history has given gold a power surpassing that of any other commodity on the planet, and that power has never really disappeared. The U.S. monetary system was based on a gold standard until the 1970s. Proponents of thisstandard argue that such a monetary system effectively controls the expansion of credit and enforces discipline on lending standards, since the amount of credit created is linked to a physical supply of gold. It's hard to argue with that line of thinking after nearly three decades of a credit explosion in the U.S. led to the financial meltdown in the fall of 2008.

The easiest way to gain exposure to gold is through the stock market, via which you can invest in actual gold bullion or the shares of gold-mining companies. Investing in gold bullion won't offer the leverageyou would get from investing in gold-mining stocks. As the price of gold goes up, miners' higher profit margins can boost earnings exponentially. Suppose a mining company has a profit margin of $200 when the price of gold is $1000. If the price rises 10%, to $1100 an ounce, the operating margin of the gold miners goes up to $300 a 50% increase.

The most common way to invest in physical gold is through the SPDR's Gold Shares (NYSE:GLD) ETF, which simply holds gold. When investing in ETFs, pay attention to net asset value (NAV), as the purchase can at times exceed NAV by a wide margin, especially when the markets are optimistic.

A list of gold-mining companies includesBarrick Gold (NYSE:ABX), Newmont Mining (NYSE:NEM), Goldcorp (NYSE:GG), and Anglogold Ashanti (NYSE:AU). Passive investors who want great exposure to the gold miners may consider the VanEck Vectors Gold Miners ETF (NYSE:GDX), which includes investments in all the major miners. (See also: Top 5 Gold ETFs for 2017)

While gold is a good bet on inflation, it's certainly not the only one. Commodities in general benefit from inflation, since they have pricing power. The key consideration when investing in commodity-based businesses is to go for the low-cost producer(s). More conservative investors would do well to consider inflation-protected securities like TIPS. The one thing you don't want is to be sitting idle, in cash, thinking you're doing well, whileinflation is eroding the value of your dollar.

You can't ignore the effect of human psychology when it comes toinvesting in gold. The precious metal has always been a go-to investment during times of fear and uncertainty, which tend to go hand in hand with economic recessions and depressions.

In the articles that follow, we will examine how and why gold gets its fundamental value, how it's used as a money-thing, and which factors subsequently influence its price on the market - from miners to speculators to central banks. We will look at the fundamentals of trading gold, and what types of securities or instruments are commonly used to gain exposure to gold investments. We'll look at using gold both as a long-term component of a diversified portfolio and as a short-term day trading asset. We'll look at the benefits of gold, but also examine the risks and pitfalls, and see if it lives up to the "gold standard".

gold-mining margins

gold-mining margins

Gold miners are also at the mercy of fluctuating gold prices. Prices can be radically different from when a mine initially commences development to when it pours its first gold years later. Even on a month-to-month or week-to-week basis, miners can see material differences in their revenues based on what prices are doing. But thankfully, this blitz of opposing forces proves worthwhile in a secular bull market.

With the price of gold going from an average of $272 in 2001 to $1165 in 2010, pulling gold from the ground has become a lot more alluring. And the miners able to deliver gold to market at these record-high prices have seen huge increases in revenues. So long as this revenue growth outpaces costs, these miners have had the potential for fast-growing margins and stellar profits.

And this potential for profits leverage is what makes the stocks of these miners so appealing to investors. The venerable HUI gold-stock index is up a whopping 1155% from its 2001 low to its latest interim high for a reason. Gold miners should be cashing in on a secular bull in their underlying metal. But as always, there is much more than meets the eye in this wild and wacky industry.

Even though the miners are generating higher revenues, the challenges dont go away. In fact, there are even more challenges today than there were 10 years ago. And prudent gold-stock traders must be aware of and understand these challenges in order to profit in this arena.

Over the years Ive written a series of essays on gold-mining challenges, and one of the most transparent challenges is on the cost front. As weve learned over the course of this bull, miners have really struggled to control costs. And the hopes of only moderately-rising expenses are pure fantasy for most.

To really understand these costs across the industry and at an individual-company level, analysts and investors alike have a couple different options. They can either meticulously dig in the financial statements and craft their own cost measures, or use a common metric that most miners offer as part of their headline performance data. I prefer the easy option, and this cash cost metric indeed provides a high-level summary of the expense side of producing an ounce of gold.

Fortunately most miners submit to a canned format of calculating cash costs according to a standard (non-GAAP) implemented by the Gold Institute (GI) back in 1996. Prior to this standard gold miners were very creative and non-uniform in how their expenses were presented to investors. And while not all miners submit to todays standard, or comply to a tee, the GI-coined Production Cost Standard has since become a relatively uniform metric across the industry.

According to this standard, total cash costs are calculated by adding cash operating costs (direct mining expenses, stripping and mine-development adjustments, third-party smelting/refining/transportation costs, and then adding back byproduct credits if applicable) to royalties and production taxes. This number is then divided by total ounces produced to get a per-ounce figure.

Now bear in mind that cash costs are not the complete tell-all of a miners strategic health, future direction, or ability to generate cash flow. But this standard performance measure does offer investors a pretty good idea of its interim financial standing.

Cash costs tallied across the greater complex also offer a read on how the industry is trending. And thanks to a unique dataset that we painstakingly compile in-house here at Zeal, we can get this industry read. With quarterly cash-cost figures cataloged for all the major gold stocks trading in North America since 2001, we are able to calculate average annual cash costs. And with the average annual gold price thrown into the mix we are able to calculate gross margins.

For purposes of this analysis I used the simple average cash costs of the nearly two-dozen companies in our pool. And since these companies collectively produce about half of the global mined supply of gold each year, I would say this is a fair representation of the industry as a whole.

Focusing on cash costs first, you cant miss the upward trend over the course of golds bull. Its also hard to miss the change in slope just over halfway through this timeline. Early on the miners were able to control costs for the most part. In each of the first six years cash costs increased by an average of 8% per year, which is equivalent to about $15 per ounce per year.

Conditioning was among the main reasons for this early moderate rise in cash costs. Over the entire decade of the 1990s the gold price averaged a ghastly-low $350, and the gold miners were forced to adapt. And those miners that survived the ravenous secular bear preceding this bull were producing gold from mines with very favorable mineralization. They learned to operate under lean cost structures.

But these somewhat-restrained rises in costs were smashed coming into 2007. In the last four years cash costs have progressively blasted higher, increasing by an average of 22% per year, or about $75 per ounce per year. At $554, 2010s average cash costs are 214% higher than they were in 2001. Even more astonishing is todays cash costs are double 2001s average gold price!

There are a number of reasons for this meteoric rise in cash costs. And provocatively one of the biggest reasons is the rising gold price. These historic highs are allowing miners to develop deposits that would not have been economical several years earlier. And the newer mining operations that pull from lower grades and more complex ores are naturally going to have higher operating costs. More and more of these higher-cost mines have come online in recent years, thus driving up industry cash costs.

And speaking of lower grades, this higher gold price affords the option of a sneaky system of selectivity that you wont hear many executives openly discuss in their conference calls. What is commonly referred to as low-grading is an opportune way to extend a mines life without compromising too much on the revenue front. This of course only works in a rising-gold-price environment.

In simple terms, low-grading involves mixing and/or shifting the ore that is being mined. Mixing is nothing more than intentional dilution. Occasionally youll see miners mix higher-grade reserves with waste rock, tailings, or lower-grade ore in order to preserve the higher-grade stuff for later if gold prices are lower. Youll also see operators shift mining to lower-grade portions of a deposit, again to preserve the higher-grade material for future use.

These methods will obviously drive per-ounce costs higher since it costs the same to process a ton of ore regardless of the grade. While investors arent usually keen on this strategy, it helps secure longevity in a business that is constantly fighting time.

Another major factor influencing these sharply-rising costs is energy-related expenditures. From fueling a mining fleet to generating power in processing facilities, mining is an energy-intensive business. Gold miners are therefore very sensitive to energy costs. And with the price of oil going from $50 in early 2007 to nearly $150 in mid-2008, miners were indeed seeing their energy costs skyrocket.

Last but certainly not least of the major factors negatively impacting costs are the effects of byproduct credits. Gold mineralization is often accompanied by other minerals, predominantly economic grades of copper, silver, lead, and zinc depending on the specific geological makeup of a given deposit.

As noted in the formula above, it is customary for gold miners to use the revenues from the sales of these byproduct metals to credit cash costs. And with silver and the base metals enjoying huge bull markets of their own, these byproduct credits have had material impacts on golds net cash costs. The higher the prices of these metals, the lower golds cash costs will be. But if the prices of these metals decline, the resulting lower revenues make for less of a byproduct credit. And this naturally leads to rising cash costs.

Interestingly all these major byproduct metals peaked and turned south around the same time cash costs started to balloon. Zinc saw its high in Q4 2006, and even after a strong 2009 recovery it is still trading well less than half its high. Lead saw its high in Q4 2007, with its subsequent price activity very similar to zincs. Copper saw its first major high in Q2 2006, ground sideways for a couple years, and then got a huge panic haircut. Even after a major recovery its price is still well below its 2006 high. Silver saw its high in Q1 2008, and so far has been unable to challenge those levels again. Overall this byproduct weakness over the last several years has indeed had an adverse affect on gold cash costs.

Ultimately with the cost of doing business rising at such an astronomical pace, youd think this industry was broken and failure was imminent. Not many businesses can withstand a more than double in unit costs over a short period of time and survive. But thankfully gold mining is not your typical business. Incredibly, thanks to the rising gold price these miners are seeing their margins as robust as theyve ever been.

As you can see in this chart, increases in the average gold price have easily outpaced cash-cost increases. With golds average price rising by 328% since 2001, well ahead of cash costs 214% rise, gross margins have actually improved. Assuming the miners are selling their gold at spot, the price/cost spread has grown by over $500 per ounce since 2001. And even with these sharply rising cash costs, a simple gross-margin calculation shows that business is doing just fine.

Gross margin is defined as the proportion of each dollar of revenue that the company retains as gross profit. And with GMs over 50% each of the last 5 years, these miners should be in pretty good shape. But of course there is more to what these raw GM numbers tell us.

Gross margins over 50% are certainly nothing to complain about, but with such sharply rising revenues shouldnt we see consistent growth on the margin front? We should, but we dont. Interestingly over golds entire bull market the vast majority of GM growth occurred over only two years, 2002 and 2006. If you look closely youll notice two major stretches of flat GMs. These stretches highlight the toll of rising cash costs.

Even though the average gold price was up 43% from 2002 to 2005, gross margins were flat. And then from 2007 to current even though gold is up 67%, we again see no growth on the GM front. Thanks to these rising cash costs, margins have just not opened up as one would expect with gold achieving record highs.

It is also important to keep in mind that gross margins are indeed gross. Not included in Gold Institute cash costs are depreciation, depletion, and amortization costs (DDA), along with reclamation and mine-closure costs. These non-cash expenses, charges/credits for the capital investment that was made in the past, are tacked on to cash costs to create what the GI classifies as Total Production Costs (still non-GAAP).

These margins thin even more when we consider miners expenses outside of operating a mine. Such endeavors as procuring mineral rights and exploration require significant capital. And if economic grades of gold are actually found, developing a mining operation comes with an enormous price tag. It can cost northwards of $1.0b just to build a decent-sized mine!

Since mining is inherently a risky and capital-intensive business, gold miners need higher margins in order to maintain and grow their pipelines. Dont let these robust gross margins have you believing that gold miners are swimming in cash. This just isnt the case considering non-cash opex and capital outflows on the exploration and development fronts.

As long as gold demand continues to rise, which it will, this industry will be faced with a lot of supply pressure. And in order to handle this pressure the miners will need to continue to spend a lot of money to build out the necessary infrastructure to replace depleted mines and build additional mines at a fast-enough pace to meet demand.

Overall the gold price should continue to trend higher over the course of this bull based on its solid fundamentals. But with more higher-cost mines coming online, cash costs are likely to continue to trend higher as well. Thankfully this current cost-and-margin picture tells us that even though miners have yet to control costs, rising gold prices allow them to maintain margins that should allow for healthy financials.

So as investors we need to ask ourselves how these miners are managing their margins. And we need to ask this question because many dont do a good job of it. Youd be amazed to find that a lot of gold miners with strong gross margins have unhealthy financials and future direction. But the miners that do successfully manage their margins have and will continue to leverage golds gains, and thus greatly reward their shareholders.

Fortunately it is not too late to capitalize on the potential fortunes of owning gold-mining stocks. As a group they still have a lot of room to run higher, in the near term and over the course of this bull. In fact, most gold stocks are bargains at todays prices. The stock-panic overhang still has this sector well undervalued relative to its historical relationship with gold. And even better, now is one of the seasonally strongest times to buy.

If you are wondering which ones to buy, you can leverage our expertise with a subscription to one of our acclaimed newsletters. In the brand-new September issue of our monthly newsletter, we recommend three new gold-stock trades and a silver-stock trade as part of a campaign to position ourselves for what we believe to be a coming strong upleg for gold and gold stocks. Subscribe today to get all our recommendations along with cutting-edge market analysis.

The bottom line is even though cash costs are on the rise, the sharply rising gold price allows gold miners to maintain strong margins. But though these margins show the potential for legendary profits, they dont tell the entire story considering the challenging business these miners are in.

These robust margins have and will make the stocks of these companies very attractive to investors. And it is critical for these margins to remain high if the miners are going to have any chance of meeting golds growing demand.

So how can you profit from this information? We publish an acclaimed monthly newsletter, Zeal Intelligence, that details exactly what we are doing in terms of actual stock and options trading based on all the lessons we have learned in our market research as well as provides in-depth market analysis and commentary. Please consider joining us each month at

bitcoingold mining calculator - coinwarz

bitcoingold mining calculator - coinwarz

Accurate BitcoinGold mining calculator trusted by millions of crypto miners. Best BitcoinGold mining profitability calculator with difficulty, hashrate, power consumption (watts), and kWh preloaded for 2021.

Our BitcoinGold mining calculator makes it simple and easy to quickly see BitcoinGold mining profitability based on hashrate, power consumption, and costs. Default inputs are preloaded with the latest BitcoinGold difficulty target and BitcoinGold mining hashrate for the best BitcoinGold miner.

The latest version of the BitcoinGold mining calculator makes it simple and easy to quickly calculate BitcoinGold mining profits by adjusting the mining hashrate values or by selecting one of the BitcoinGold mining hardware devices from the BitcoinGold miners list.

The BitcoinGold mining information is updated continually with the current block mining information. This information is used as the default inputs for the BTG mining calculator along with the default hashrate and wattage specs from the best BitcoinGold miner.

With this information and our backend hashrate calculator, you can calculate your BTG mining profits - providing valuable and strategic profitability information allowing you as the miner to make better informed decisions about BitcoinGold mining.

Along with the BitcoinGold mining profitability, the list of top 5 BitcoinGold miners is updated frequently. A BitcoinGold miner is also referred to as a BitcoinGold mining rig, or a BitcoinGold mining hardware device, or a BitcoinGold mining machine, but we simply call them miners, or more specifically, BitcoinGold miners.

Each BTG mining calculator input has been preloaded with the best BitcoinGold mining hardware hashrate and energy consumption in watts, average electricity costs as well as the current BitcoinGold price, BitcoinGold block reward, and BitcoinGold difficulty.

Calculate your BitcoinGold mining profitability and estimated mining rewards by starting with the BitcoinGold mining hashrate calculator inputs above; mining hardware, mining costs, and mining reward.

A BTG mining difficulty of 137,274.51, a BTG mining hashrate of 1,180.00 H/s consuming 600 watts of power at $0.10 per kWh, and a block reward of 12.50 BTG at $44.09 (BTG to USD).

Based the mining hardware inputs provided, 1.13325049 BitcoinGold can be mined per day with a BitcoinGold mining hashrate of 1,180.00 H/s, a block reward of 12.5 BTG, and a BitcoinGold difficulty of 137,274.51.

As of Friday, July 09, 2021, it would take 0.882 days to mine 1 BitcoinGold at the current BitcoinGold difficulty level along with the mining hashrate and block reward; a BitcoinGold mining hashrate of 1,180.00 H/s consuming 600.00 watts of power at $0.10 per kWh, and a block reward of 12.5 BTG.

top mining companies net profit margin 2020 | statista

top mining companies net profit margin 2020 | statista

This statistic includes the aggregated results of the top 40 companies by market capitalization, as reported in PwC's Mine report in each of the respective years disclosed, except for 2014, which uses the current years Top 40s financial comparative financial results. These companies represent the vast majority of the industry and serve as a proxy for the industry as a whole. All income statement data presented excludes Glencore marketing and trading revenue and costs. This statistic was assembled using various editions of the report.

This feature is limited to our corporate solutions. Please contact us to get started with full access to dossiers, forecasts, studies and international data.

gold mining stocks: dig your way to profits with these picks

gold mining stocks: dig your way to profits with these picks

In fact, Money & Markets Chief Investment Strategist Adam ODell is extremely bullish on gold, and he thinks its going to $10,000 and ounce. Yes, $10,000 an ounce. Click here to check out his presentation on why and how to make nine times the profit on top gold stocks.

Money & Markets is Americas premier source for financial news, commentary and actionable research advice. Every day, Money & Markets gives you the information you need to protect your nest egg, grow your wealth, and safeguard your financial wellbeing. Learn more.

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