Monday, 20 August 2012

Gold Stock Reflexivity

A consideration of George Soros' theories of  "reflexivity" applied to gold development stocks.
.......application to gold development stocks: when a company with a gold project trades with a high equity value, potential buyers assign high values to the project and the company, confident that the company will be able to finance the project.  In fact, the higher the stock goes, the easier it is to finance the project, and, therefore, the more value the project has to the company, and the more valuable the company.
However, if the market corrects lower and the value of the company shrinks, then financial observers will question how the company will finance the project, and therefore assign a lower value to the company, forcing the stock lower, reducing the value of the company, etc.
Worth reading in full.

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