by Zeal, Silver Doctors:
Gold mining is a very tough business. Not only is it highly capital-intensive and chock-full of environmental risks, its revenues are entirely at the mercy of a volatile commodity. It requires some serious mettle to succeed mining gold.
But despite super-high barriers to entry and the countless risk factors that come with mining, the world needs gold, and somebody’s got to produce it. And believe it or not, a lot of money can be made in this business.
At a high level gold mining is like any other business. Produce your product at costs less than what you sell it for, and you ought to prosper. And the wider that spread, the more you prosper. But unlike most other business, the “what you sell it for” is an uncontrollable variable that can violently move in either direction.
For gold miners the dangling carrot is a rising gold price. And naturally the best of times ought to occur over the course of a bull market for the metal. Gold has of course been party to one heck of a bull run over the last decade or so, with its price soaring by a staggering 638% from its 2001 low to 2011 high. Given this kind of gain, many gold miners have easily chomped that carrot on the way to big gains of their own.
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