Article ID | Journal | Published Year | Pages | File Type |
---|---|---|---|---|
7364649 | Journal of International Financial Markets, Institutions and Money | 2016 | 30 Pages |
Abstract
This paper analyses the causal relationship between gold production costs and gold prices using a set of country and company data collected at the individual mine's level. We find strong econometric evidence for causality running from gold prices to gold production costs. The results are supported theoretically by the small amount of annual gold production relative to the total stock and the real options embedded in gold mines. The low flow to stock ratio of gold implies low market power of gold mining firms and thus an inability to significantly influence gold prices. The real options enable gold mining firms to adjust production costs conditional on the gold price; production costs thus follow gold prices.
Keywords
Related Topics
Social Sciences and Humanities
Economics, Econometrics and Finance
Economics and Econometrics
Authors
Fergal A. O'Connor, Brian M. Lucey, Dirk G. Baur,