How Gold Royalties Offer Inflation-Resistant Gold Exposure
As rising inflation has increased the operational expenses of gold mining companies, gold royalty companies have emerged as an inflation-resistant alternative for investors seeking exposure to the precious metal.
Without exposure to rising wages, fuel, and energy costs, gold royalty companies are able to maintain strong profit margins that are often more than double those of gold mining companies.
This infographic sponsored by Gold Royalty is the first in a two-part series and showcases exactly how royalty companies naturally avoid inflation, along with the superior profit margins that come as a result.
Inflation’s Dampening Effect on Gold Mining Profits
Since mid-2021, inflation has become a constant risk-factor for investors to keep in mind as they manage their portfolio. Every energy fuel has risen in price over the last year alongside wage increases around the world, greatly impacting the expenses of material production and refining.
Gold mining is no exception, and while operational costs have risen, gold’s price has actually decreased slightly over the same time period, further impacting gold mines’ profitability and margins.
| Commodity | Price change since the start of 2021 |
|---|---|
| Coal | +372% |
| Gasoline | +72% |
| Diesel | +53% |
| Electricity | +24% |
| Gold | -13% |
The impact of inflation can’t be understated when it comes to mining operations, which require large amounts of machinery, electricity, and people.
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