If oil were all of a sudden to double where would the precious metals go - think 60% cost of mining is energy
Well, they would double! Very simple econ 101 here. So what happens when oil keeps getting more and more difficult to extract> simple econ 101 once again tells us that the price will go up. Most people don't understand that mining costs are formed of up to 60% energy costs. Yes it takes a whole bunch of diesel and electricity to mine gold and silver, and I won't even mention how much energy is needed for refining them because I think you get the picture by now.
SRSRooco has a great article in which they use an overlay chart of oil and the US equities. They also do a good job explaining why the markets are soo overvalued, I understood all this - but to me the chart is also a reminder that at oil price $135 the price of gold would be at least $2600 and the price of silver at least $35.
Source:
https://srsroccoreport.com/the-stock-market-is-seriously-overvalued-based-on-this-benchmark/
In a game as heavily rigged as this one, there is no logic. The only thing to focus on is the inevitability of the end result which will be the collapse of the rigged system itself.
I'm not looking to play the turns, I'm in this for the long haul.
A quote for the books! Super well said.
Nice post. Yes, I think energy costs are something not talked about a lot in mining.
Thanks. Refining as well. 'Loads' of energy needed.
That is so simple and elegant. I have known Silver was under-priced so I have been buying some. Did not occur to me why though. I feel like a little dumb for missing the obvious: Oil. Thanks Bro. This gives some insight into my future strategy.
Thanks for the kind comments
The thing this idea doesn't account for are sudden supply increases. Particularly fracking and the newly discovered artic oil field. Even the discovery of new fields, if large enough, lowers prices based on anticipated future supply.
Fracking has been proven by all accounts to lose money per each barrel extracted. Inflation if even alone will dictate future prices. Have you seen where the $'s purchasing power is going? How about "shrinkflation"
It's less about making money, and more about sticking it to the Sauds. Imagine how much the Sauds haaaated that price drop in your chart... All because of fracking. Hated it so much they secretly funded that Matt Damon documentary against it. Russians hated it so much they funded the Standing Rock protests.
Literally every oil producer in the world getting rich off of US consumption detests the fact we figured out how to pull it locally without tapping out emergency reserves.
It's not a profit move, it's a political one. And so it's likely to keep going. A passive aggressive way to defend nation's getting a little big for their britches, and much more effective than a UN resolution. ;-)
The problem is, oil won't double. A barrel will never again climb to 100$ because there are too many sellers on the market and interested fraction (US of A for example), who like to make good money but also need the liquid to be cheap. And the rest will be renewables. If oil goes too high up, investments flow into solar stuff.
Bottom line: The world has many problems, but the oil price isn't one of them, not anymore.
there is a good read for this called "zeropoint energy" and also the new agenda thats out, the one dated 11 years from now. I believe oil will be a super commodity in the future, basically only the richest can afford. Thankyou for the comments though and your welcome to keep them coming, we all need a good debate to stay sharp
i believe the buying power of the great and powerful dollar has a lot to do with the increase also. It take more of them lame dollars to purchase these oil, gold, silver … but it the end I believe it is all manipulated further than most would like to think.
well said
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