An overview of global gold market and gold price forecasting

The global gold market has recently attracted a lot of attention and the price of gold is relatively higher than its historical trend. For mining companies to mitigate risk and uncertainty in gold price fluctuations, make hedging, future investment and evaluation decisions, depend on forecasting future price trends. The first section of this paper reviews the world gold market and the historical trend of gold prices from January 1968 to December 2008. This is followed by an investigation into the relationship between gold price and other key influencing variables, such as oil price and global inflation over the last 40 years. The second section applies a modified econometric version of the long-term trend reverting jump and dip diffusion model for forecasting natural-resource commodity prices. This method addresses the deficiencies of previous models, such as jumps and dips as parameters and unit root test for long-term trends. The model proposes that historical data of mineral commodities have three terms to demonstrate fluctuation of prices: a long-term trend reversion component, a diffusion component and a jump or dip component. The model calculates each term individually to estimate future prices of mineral commodities. The study validates the model and estimates the gold price for the next 10 years, based on monthly historical data of nominal gold price.     

Developing of a pricing model for Turkish lignite used in thermal plants

The objective of this paper is to develop a general pricing model for Turkish Lignite, which is mainly sold to thermal plants. This model will contribute to the development of coal mining within the scope of privatization efforts of the Turkish energy market. The paper consists of two stages. First, data of 10 thermal plants have been evaluated by using hedonic pricing analysis to determine influential price parameters. The results of hedonic regression analysis indicate the effect and importance of calorific value and electricity price on lignite prices. Second, a general coal-pricing model has been developed by taking into account the results of hedonic analysis. Comparison of the coal prices estimated by the developed pricing model and the coal prices obtained from thermal plants indicates an acceptable relation.     

Mining taxation issues for the future

During the 1970s and 1980s the main concern of mining policies was to attract investment whilst at the same time balancing the interests of governments and companies. By the turn of the century a new spectrum of challenges faces governments and companies in the mining sector. The need for fiscal regimes to adapt to price cyclicity is to some extent superseded by the requirement that they adapt to a long-term decline of metal prices. The growing importance of environmental and community affairs in the mining sector will force governments to design coherent and comprehensive tax regulations to complement the wide range of initiatives being taken in these fields. Finally, the age-old problem of tax collection continues to raise its head in transition and developing economies.     

Post-merger time series analysis: Iron ore mining

In Brazil, mergers and acquisitions are usually analyzed by the antitrust authorities ex post, following a Structure-Conduct-Performance approach close to the US Merger Guidelines. However, this framework was unable to address the complexity posed by a series of acquisitions of four mining companies by the newly privatized national champion Companhia Vale do Rio Doce (known then as CVRD, nowadays as Vale). This article extends a Vector Error Correction model estimated by the Brazilian Ministry of Justice, which eventually came to reinforce the definition of the relevant geographic market and to test for structural breaks in the price series. A formal horizontal merger simulation model was not viable from the available data. Though international prices Granger-caused domestic prices in Brazil, they explain less than a third of the variance. Domestic price hikes in the acquired miners’ series were observed above the export price increase not long after the acquisitions, and a structural break could not be rejected. Since convergence of domestic prices to international levels were not to be punished, remedies eventually applied by the Brazilian Antitrust Tribunal focused on preventing CVRD from abusing dominant position to vertically foreclose competitors in logistics, a key competitive issue for the industry.     

The impact of commodity price risk management on the profits of a company

It is well recognized that for the producing companies hedging the commodity price using financial products like forwards or futures has become an important part of the company's production process. But apart from the direct impacts of hedging on the production and hedging costs the use of financial products affects the financing of the company: hedging the volatile commodity prices leads to a reduction of the risk premium the company has to pay for its debt capital, since hedging contributes to more confidence of the investors in the redemption of the debt. In this paper we therefore analyze this dependency of hedging and financing and derive optimal hedging extents for companies in different market situations based on a long-term model. By hedging the commodity price, companies can realize a surplus in profits. Thereby, the optimal hedging extent for a monopolist is often up to 100%, whereas for companies in a polypolistic market the optimum is always less than 100%. These results are illustrated by examples for a producing company.     

The Effect of Government Involvement on the Economics of the Base Metals Industry

The correctness of the statement that surplus production and depressed prices in the base metal industries are the result of state ownership in the mining industry is examined by analyzing the production figure of publicly and privately owned companies. The conclusion is that for some metals the statement is true. But it is equally true that, for some, privatelyowned mining companies have also maintained high levels of production in the face of depressed demand. The reasons why both state and privately owned mining companies have not been able to rationalize production are examined. For privately owned companies it is suggested that a shift in the method of financing mineral projects, i.e. from retained earnings to bank loans, is an important factor.     

Forecasting precious metal price movements using trader positions

In the early 2000s, the precious metal markets entered into a new phase where a steady rise of prices had been observed until the October 2008 crash. Given the size and importance of precious metal market, as well as the hedging capacity of precious metals due to their low correlation with equity markets (Draper et al., 2006), the question we want to arise is whether trader positions predict the direction of gold, platinum, and silver spot price movements. The forecasting content of the Commodity Futures Trading Commission’s Commitment of Traders report for platinum, silver and gold prices using trader positions is investigated in a VAR framework. Granger causality tests are conducted to determine whether a relation between trader positions and market prices exists. An examination of the extreme trader positions on price movements is also conducted. The results indicate that market return is a significant parameter in explaining trader’s positions for all trader types in each of the precious metal markets under consideration after the beginning of 2000s where we detect a structural break for each of the market under study. Commercial traders are found to be negative feedback traders, that is, they sell when the prices increase in the market. On the other hand, in line with the previous literature, a positive correlation between returns and positions held by non-commercial and non-reporting traders is found. However, trader’s net positions do not lead market returns in general. There is some evidence on the forecasting ability of extreme trader positions on market returns.     

Investment policies in the base metal mining industries and their impact on price cycles

Investment in increased capacity of the major metal producers is examined in the light of changing metal prices and the business cycle. Historically, as metal prices rise, the producers have invested in new mine capacity. This process results in increased production which often comes on stream just as the business cycle is beginning to wane. During the present business cycle the investment pattern of the major mining companies appears to have broken with this historical pattern in that investment strategies are less directed toward increasing capacity.     

Oil spills on other commodities

This paper examines the effect of crude oil prices on the prices of 35 internationally traded primary commodities for the 1960–2005 period. It finds that the pass-through of crude oil price changes to the overall non-energy commodity index is 0.16. At a more disaggregated level, the fertilizer index had the highest pass-through (0.33), followed by agriculture (0.17), and metals (0.11). The prices of precious metals also exhibited a strong response to crude oil price. In terms of individual commodities, the estimates of the food group exhibited remarkable similarity while those of raw materials and metals gave a mixed picture. The implication is that if crude oil prices remain high for some time, as most analysts expect, then the recent commodity price boom is likely to last much longer than earlier booms, at least for food commodities. The other commodities, however, are likely to follow diverging paths. On the methodological side, the results show that price indices, while providing useful summary statistics, they need to be supplemented by individual commodity analysis.     

A review of the PGM industry,deposit models and exploration practices: Implications for Australia's PGM potential

Australia is prospective for platinum group metal (PGM) mineralisation (in particular primary magmatic reef, primary magmatic by-product, late magmatic and hydrothermal, and alluvial placer type) but its known PGM endowment is negligible compared to that of South Africa, Russia, the USA and Canada. Most Australian PGM projects are operated by mid-cap or junior companies and form part of larger, more diverse project portfolios held by these explorers. Most projects were ‘hot’ while market conditions were favourable. However, as other metals became ‘fashionable’ and market conditions for PGM changed, so did the focus of these companies. Pure PGM companies are rare in Australia. The search for and development of PGM-only deposits in Australia are high risk business activities. No new primary PGM deposits have been discovered since the mid to late 1980s and none of the significant deposits that were discovered or evaluated in the 1980s have been mined. This review suggests that at least several A$10 million but more likely several A$100 million were sunk into PGM exploration and development projects but none advanced to the mining stage. The viability of Australian PGM projects is very sensitive to (1) metal prices, (2) the US$/A$ exchange rate, and (3) large capital expenditure requirements relative to the small size of Australian PGM-only deposits. Most PGM-only projects were initiated at times of high PGM prices. However, advanced exploration, feasibility studies and project development always lagged behind the price booms. South Africa, Russia and Canada contain approximately 98% of the known global PGM reserves. This situation has a very negative effect on the Australian PGM industry as the well-endowed nations continue to receive the lion's share of exploration spend and new projects.     

Long memory and chaotic models of prices on the London Metal Exchange

Many financial time series exhibit irregular behaviour. Economic theory suggests that this irregular behaviour might be due to the existence of nonlinear dependence in the markets. Thus, economic time series are governed by nonlinear dynamics.The purpose of this paper is to investigate price behaviour in the London Metal Exchange market. Thus, this study will test the two most attractive nonlinear models—long memory and chaos—on six metal commodities to ascertain which model is consistent with the observed metal price nonlinear dynamics.Application of long memory and chaos analysis provides new approaches for assessing the behaviour of metal prices. We identified, in tin, a case of chaos. Our empirical results in the case of aluminium support the long memory hypothesis. A short memory model explains the underlying processes of the nickel and lead returns series, while zinc returns reflect an anti-persistent process. To our knowledge, this is one of the first attempts to apply long memory and chaos analysis in the evaluation of the behaviour of metal prices.     

Long-term iron ore price modeling: Marginal costs vs. incentive price

The paper studies and applies the approaches to forecast long-term (LT) real prices of iron ore. This price is crucial for valuation of investments in Greenfield iron ore projects on the horizon of more than 5 years. The forecast is obtained by three different approaches which are usually used by investment bank analysts: marginal costs approach and 2 approaches based on calculation of incentive price. The paper concludes that there has been a structural shift on the iron ore market and LT iron ore prices will be higher by 20–30% than the average of industry forecasters suggest. This is related to the 2 key factors which were taken into account in this study—depletion of existing iron ore deposits and targeted return on investments for new projects. In addition, escalated industry costs inflation is claimed to be the factor which will bolster nominal iron ore prices at high levels in the long-term. Using a Monte-Carlo simulation approach, confidence interval for future iron ore price was estimated.     

影响中国碳价的能源价格因素灰关联研究

本文选取中国碳排放价格数据和8种能源价格指数为研究变量,运用灰色关联方法研究了中国能源价格对中国碳价的影响。研究结果发现,化石能源价格对中国碳排放价格的影响较大,特别是煤炭、成品油和基础油价格对碳价的影响最大;低污染能源中,与天然气相比,液化气价格对中国碳排放价格影响明显。研究结果指出了保持碳市场价格稳定、防范价格异常波动的重要性,并从能源价格体系和能源消费结构角度提出了政策建议。     

Investor demand and spot commodity prices

The on-going debate over the influence of investor demand on spot commodity prices largely attempts to assess this influence by measuring the growth in investor demand in recent years. Given the serious data problems that plague such analyses, this article pursues another approach in the hope of providing useful insights into the impact of investor demand on spot commodity prices. It focuses on the mechanisms by which investor demand affects spot prices, and in particular on two questions. First, how does an increase in investor demand on the futures markets affect the spot market and spot price? Second, when investor demand is increasing and pushing a commodity's price up, do physical stocks of the commodity also have to be rising, as economists and others widely assume?On the first question, the article concludes that a surge in investor demand raising prices on the futures markets will have a direct and comparable effect on the spot market prices when these markets are in strong contango. However, when markets are in weak contango or backwardation, price movements in the futures markets have a much looser effect on spot prices. As a result, changes in investor demand on the futures markets may have little or no influence on spot prices in the absence of a strong contango. Instead, changes in fundamentals (that is, producer supply and consumer demand) and possibly changes in investor demand taking place directly on the spot market largely determine the spot price at such times.On the second question, the article shows that investor demand can be pushing up a commodity's price even when investor stocks are falling, despite the widespread presumption to the contrary.     

Investing in fertilizer–mining companies in times of food scarcity

The primary goal of the paper is to show the validity of investing capital in fertilizer–mining companies, both from a market return perspective for individual or institutional investors, or from a hedging standpoint for insurance companies and other economic actors exposed to inflation risk and high agricultural commodity prices. After providing some elements on the fertilizer market and describing the joint dynamics of corn, wheat and fertilizer prices over the last decade, we analyze an exhaustive sample of listed fertilizer producing companies over the years January 2004–December 2012. We show that their shares generated quite good returns over the whole period and extremely high ones during the years January 2004–December 2007, both in absolute terms and compared to their betas. We also exhibit that these returns display higher sensitivities to major agricultural indexes than to the World Bank Fertilizer Index, making the hedging argument quite compelling.     

猪肉价格周期波动的时空差异特征及影响因素研究

我国作为猪肉生产大国、消费大国,猪肉价格波动事关普通百姓生活。利用2001—2019年猪肉价格省级面板数据,对猪肉价格长期波动的空间差异性进行了分析。结果表明:①从我国八大经济区及调入区、调出区猪肉价格区域差异测度结果来看,北部沿海区域内各省份猪肉价格差异最大,东北区域和长江中游区域差异较小;同时从猪肉价格差异贡献率来看,区域内差异贡献率更大。②从猪肉价格波动时空演进测度结果来看,地区间差异明显存在,同时各省份之间空间集聚性呈现出波动状态,表现出先减弱后增强的长期趋势。③从对猪肉价格周期性变化规律分析结果来看,价格波动存在明显的周期性,“猪瘟”、重大疫情等突发因素短期影响作用较大,而常规因素的影响才是价格波动真正推手。④在所筛选的猪肉价格常规影响因素中,育肥猪配合饲料价格、仔猪价格、地区生产总值引起猪肉价格差异的作用显著,且育肥猪配合饲料价格对猪肉价格差异影响程度最大。     

Modeling the impact of revegetation on regional water quality: A collective approach to manage the cumulative impacts of mining in the Bowen Basin,Australia

In this paper we quantify the additional water quality benefits that can be achieved through coordinated cumulative impact management. To do this we simulate coordinated and un-coordinated revegetation investments and compare their impact on achieving regional water quality goals. Our results show that coordination between multiple mining companies achieves additional benefits since prioritization is enabled across a broader range of investment opportunities. Additionally, when coordinated investment is permitted beyond the boundaries of coal mining leases, results show that additional benefits are greatly enhanced since these regions provide more rewarding investment opportunities. Results illustrate (a) how regional coordination may influence reputational benefits of investments, and (b) that coordination is beneficial when investment opportunities are unevenly distributed across the landscape. When additional benefits are achievable, we suggest that mining companies should develop collective investment projects with an understanding of how coordination influences project costs. Similarly, investment projects should be developed with an understanding of investment tradeoffs and how these may adversely impact on regional stakeholders and hence industry reputation. The mining industry has significant potential to contribute to regional wellbeing; however, land management policies must be flexible and promote incentives to enable companies to invest beyond compliance.     

International coal prices

The place coal will occupy among the world's energy supplies depends on many factors, including its price trends. This paper reviews recent price trends and supports the thesis that future coal prices are independent of oil prices, and that they will fluctuate between two limits which are based on production and transport costs in the USA and Australia.     

Mining investment in Africa

Since 1985, there has been rapid growth in the presence of Australian exploration and mining companies in Africa. This paper sets out the reasons for the interest of those companies, now 20 in number, in various African mineral opportunities. Australian companies spent about US$16 million in 1992 on African exploration and evaluation, with over US$130 million spent on new mine development or expansion. The 20 Australian companies operate in 16 African countries, with two areas of focus, West Africa and Southern Africa. Using the responses to a survey sent to Australian companies operating in Africa in 1991, and to companies known to be interested in prospects there, the paper identifies and categorizes the policy and regulatory requirements needed by investors. Although a gloomy picture has often been painted of investment in Africa, Australian companies recognize that their risk taking, in the light of a declining investment climate in other mining areas, could promote a renaissance of world-scale mining in Africa.     

Long-term trends in the Real real prices of primary commodities: Inflation bias and the Prebisch-Singer hypothesis

Following the Boskin et al., (1996) report, it became widely recognized that price indexes in the U.S. and elsewhere overstate inflation. Svedberg and Tilton (2006) highlighted that this inflation bias may have important implications for estimated long-term trends in nonrenewable resource prices. ST construct an inflation-bias corrected CPI (and PPI) for the U.S. and use their corrected deflator(s) to define a so-called ‘real real’ price of copper. Their ‘real real’ price of copper is then used to re-estimate long-term trends in real copper prices. This paper proposes a quick method for obtaining inflation-bias-corrected estimates of long-run trends in real primary commodity prices directly from estimates in the published literature. Our approach obviates the need re-do existing empirical studies using a corrected or ‘real real’ price of nonrenewable resources. The two approaches are mathematically equivalent.