Valuing Mining Companies

If forecasting gold prices was as easy as forecasting the weather, I would be a millionaire by now. The reality is quite different; many factors go into forecasting the price of gold such as demand for gold products, supply of gold, inflation, the American dollar, the amount of speculative traders...etc. Coming up with the exact prize of gold is unrealistic and unfeasible. However, understanding the trend of future gold prices is doable and relatively easy. The correlation between gold price and stock price for gold companies is very high. Therefore, understanding where gold prices are trending and what drives gold prices would give us a better picture and a more accurate valuation estimate.

As a result, I decided to write a report about gold. I intend to include in the report the properties and usage of gold which will help us understand the demand side of the equation. Also, I will include information about global gold reserves and major competitors to understand the supply side. Also, the production of gold will be explained. By doing this, I hope to give a better understanding of the costs related to gold extraction. Understanding costs will help us realize which gold mines are feasible for future extraction giving us more information about the future supply of gold.

By understanding the demand and supply of gold, gold price trends can be forecasted.

Iyad Atuan