Markets
Gold in Australian dollars
What Australian gold miners actually receive: the US$ gold price divided by AUD/USD. Their costs are mostly in A$, so a weaker Aussie dollar lifts A$ gold and their margins even when US$ gold stands still.
Why Australian investors watch gold in A$
Gold trades in US dollars, but an Australian miner pays its wages, diesel, contractors and royalties in Australian dollars. What matters to its margin is the A$ gold price less its all-in sustaining cost (AISC), also in A$.
So a falling Aussie dollar lifts the A$ gold price even if US$ gold stands still - one reason ASX gold producers have had a structural tailwind whenever the currency weakens. What moves gold stocks.
Operating leverage in one example
A producer with an AISC of A$2,500/oz earns a A$1,500 margin at A$4,000 gold. If gold rises 10% to A$4,400, its margin rises to A$1,900 - up 27%. That's why gold equities move harder than the metal, in both directions.
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