Key Issue: What is the GartnorGroup’s 5:4 ratio pricing trigger ?
Title: GartnorGroup’s evaluation of precious metals
5:4 Pricing Methodology
This pricing methodology provides a starting point for comparing the relative values of precious noble metals based on their abundance in Earth's crust. However, it's important to note several key points:
Simplification: This model greatly simplifies the complex factors that determine metal prices in the real world. Actual prices are influenced by many factors beyond just rarity.
Market Dynamics: The model doesn't account for supply and demand dynamics, which play a crucial role in price determination.
Extraction Costs: The difficulty and cost of extracting different metals vary significantly and are not reflected in this model.
Industrial Utility: The usefulness of a metal in industrial applications greatly affects its value, which is not captured here.
Investment Demand: Factors like investor sentiment and use as a store of value are not considered.
Geopolitical Factors: The concentration of deposits in certain countries and geopolitical issues can significantly impact prices.
Historical and Cultural Value: Some metals, like gold, have additional value due to historical and cultural factors.
To make this model more accurate and useful, you would need to:
Introduce weighting factors for industrial demand and other uses.
Incorporate extraction and processing cost differentials.
Add a factor for market liquidity and trading volumes.
Regularly update the model with current market data.
Consider including a volatility factor based on historical price movements.
While this ppb-based model provides an interesting theoretical baseline for comparing metal values, it should be used cautiously and in conjunction with other pricing models and market analysis for any practical application. Real-world precious metal pricing is far more complex and dynamic than this model suggests.