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The impact of gold price on the value of gold mining stock

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  • Laurence E. Blose
  • Joseph C.P. Shieh

Abstract

The value of a gold mine is shown to be a function of the return on gold, production costs, the level of gold reserves, and the proportion of assets unrelated to gold price risk. Assuming that forward gold prices are the market's unbiased expectations of future spot prices, a model is derived that estimates the theoretical gold price elasticity of gold mining stock. The model shows that if a company's primary business is gold mining, the gold price elasticity of the company's stock is greater than one. Using monthly data over the ten year period 1981 through 1990, the model is tested for a sample of 23 publicly traded gold mining companies.

Suggested Citation

  • Laurence E. Blose & Joseph C.P. Shieh, 1995. "The impact of gold price on the value of gold mining stock," Review of Financial Economics, John Wiley & Sons, vol. 4(2), pages 125-139, March.
    • Handle: RePEc:wly:revfec:v:4:y:1995:i:2:p:125-139
    DOI: 10.1016/1058-3300(95)90002-0
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    References listed on IDEAS

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    4. Xie, Xiaoyu & Zhu, Heliang, 2021. "The role of gold futures in mitigating the impact of economic uncertainty on spot prices: Evidence from China," Research in International Business and Finance, Elsevier, vol. 56(C).

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