How Does Oil Going Up, Effect The Big Four Pm's?

Somewhat correct and somewhat not true.

Because mining companies lock in contracts with their clients, they try to lock in contracts for a few months to stablize prices. The same is true for oil called hedging. The real problem is this, people don't understand that high oil prices mean everything gets expensive - people just don't have enough money to buy everything. The bigger problem is, you probably will have to pay more for your grocery bills even before discussing about precious metals. That's what happened in 2008 when people screamed that oil prices will hit 200USD/barrel. It can happen but you probably will have to pay so much - probably barely enough to get to and from work.

Another factor to consider: higher petrol costs means fewer people using their cars. Less car usage means cars wear out slower, which should mean less demand for new cars, and new cars are still one of the largest consumers of platinum and palladium. Less demand from the automotive industry means that rising oil prices should cause downward pressure on platinum and palladium, long-term.

Countering this trend in the short term, people might finally decide to get rid of their old gas guzzlers and trade in for a newer, more fuel-efficient car, causing a spike in new car purchases and resultant platinum price. I suppose whether or not people actually do that would depend on whether the higher oil prices were perceived as being a temporary blip or the start of a new paradigm.


.
Don't know. What's a "gallon"?

Looking it up on Wikipedia, I see that a US gallon is 3.79 litres. An hour ago I filled up the petrol tank on my car; it cost me AU$1.30/litre. That would be the equivalent of US$5.00/gallon, if my maths is right.

So don't come crying to us about "high petrol prices".

Pretty much so Silverhawk74. But again, since all companies have different kinds of contract, I cannot generalize the whole industry as what I mentioned. Sometimes hedging works in favor, sometimes it doesn't. I believe Southwest Airlines saved a fair bit of money because of how they hedged with oil prices. One of the better examples where hedging backfired was when Ford hedged as much palladium as they could as that was the time when palladium shot over 1000usd/oz. Sure it would have been brilliant if palladium prices hit over 2000USD/oz and Ford could have saved a fair bit. But no, it fell down to 250usd/oz and it backfired big time. Ford apparently lost over 1 BILLION dollars over this. It's not that much different from gambling.

Personally, I see this marketing price as "turbo charged" and "turbo lag". Sure, when you have some drama that happens, demand goes up high and supply can't keep up. You get the turbo charge effect and prices shoot up high. When there's enough supply and panic buying demand lowers, you get the turbo lag effect and prices start falling. Short term wise, it's not surprising that all the news hype have an impact on prices. Prices of various things is another story - it just seems to me that we have so many cogs and wheels running against each other and depending on what force there is, prices go one way or the other.

The reality is, how is this investment stuff going to affect people worldwide? In the past, I did think it would be awesome for me to invest in anything so long as I have extra money in my pocket. But after experiencing the global financial crisis, 1997 Asian Financial crisis, I thought this whole idea of investment is pretty selfish. Again, this is MY belief so please don't take it personal. Back when oil prices started to hit 100USD/barrel, I was arguing with my mate who works in a finance company and he reckoned it's not surprising that oil prices could hit 200USD/barrel. Think about the impact of that - you have to pay twice as much to fill your car up, significantly more to pay for your groceries, everything just goes up because we are tied down to the prices of fuel. The world can't afford 150USD/barrel even though there's "low supply" - people just can't afford it!

Of course for the rich, it's easy for them to wreck the market - if they reckon prices are too high, they just dump whatever they can. It's usually the poorer people that reckon they can make money and buy when prices head higher. Boom - people get hit. Richer people can always afford to make a loss because they already made a profit! (Of course they aren't perfect all the time and some do get broke) Regardless of how hard an average Joe does to perform better, the richer people can just manipulate the market as they wish.

Personally I had enough with this - sure it's always nice to retire a bit more comfortable and such but is it worth the expense over worrying so hard over it? I have dealt with money mongers and I swear it wasn't for me. For me, I've decided to invest in more knowledge, close relationship (as in making quality friends, not quantitative) as well as in myself. When I mean by myself, sometimes people just don't trust their own judgment - this can relate to examples such as fatigue, ethics, instincts and so forth. Sure you might be working so hectic, you just don't give yourself a break and might end up breaking down.

To answer your last question, since the Australian dollar is close to parity to the US dollar, we pay 1.43 dollars / liter, which makes it easily over 5 US dollars / gallon. Guess that's all I got to share for now Once again, please don't take offense to what I rambled on - one of those rants on a tiring day.

cheers

Silverhawk74: a couple of links if you have the time and interest to read in - I'm pretty sure you will find them more than useful. Might be overwhelming at first but I found it entertaining.

http://www.infomine.com

http://www.kitco.com

I just managed to find myself work in the mine recently and this is why I would have a little better clue on what is going on. Not precious metals but it's still a mine.

I wish you the best luck silverhawk - down to earth people like you should live much easier. Not too sure if I can answer any more of your burning questions as I'm not an investor myself but hopefully those links I mentioned are useful.

cheers

74,

I read recently that between 35 and 40% of gold and silver cost is energy. That seems reasonable. All companies with large fuel demands buy large fuel contracts. It allows them to better control costs and factor in large swings in price incrementally. Still, those contract run out and new one that represent the current cost are purchased and have to be factored into the selling price. So, yes, energy will drag precious metals higher all other things being equal. Always the caveat.

Jim