As developing nations modernize there will be continued long term demand for commodities. Commodity prices will remain volatile, as noted with the oil prices that have recently pushed gasoline prices in the U.S. to over $4.00/gallon at the pumps.  Anyone who drives a car or buys anything is aware of higher prices.

A yard-stick that can be used to measure price increases in commodities is the Goldman Sachs Commodity Index (S&P GSCITM). The S&P GSCITM has been designed to provide investors with a reliable and publicly available benchmark for investment performance in commodity markets comparable to the S&P 500. The performance of the S&P GSCITM reflects the change in commodity prices, and is a composite index of un-leveraged, long-only investment in broadly diversified commodity futures.

In April 2008, the S&P GSCITM increased 7.96% as a result of high energy prices. The S&P GSCI Energy Index was the leading sector, adding 11.32% for the month, resulting in YTD total return of 23.47%. The second leading sector was the S&P GSCI Livestock Index which had a 6.82% increase in April. During the month the S&P GSCI Precious Metals Index declined 5.84%. This was after a decline of 6.77% in March after gold rose above $1,000 an ounce which incited profit taking that dropped gold prices from a closing high of $1011.25 per ounce (London Fix) on March 17, 2008, to a recent low of $853.00 per ounce (London Fix) on May 1, 2008.

On June 25, 2008, BMO Global Commodity Strategist, Bart Melek suggested that rising food and energy prices and uncertainty in equity markets, and a continued weakness in the U.S. dollar, will renew the interest in gold.

Many analysts are concerned about the increased cost of mining as fuel and materials costs have exploded. In reality, over the last year the price of gold has continued to outpace the rise in prices. Insidemetals.com, a website for investors interested in the stocks of U.S. listed precious metals gold producers has reviewed its database on the 35 producing gold companies that it reports on, and is able to report some supporting statistics concerning the spread between realized gold prices per ounce and the cash cost of production per ounce. This spread is reflective of a company's profitability on operations.

It is also important to report that there are distinct differences in the financial character of the companies based on the stock exchange where they trade. These differences have important investment ramifications as they reflect the impact of rising costs over the respective companies.

InsideMetals reports on 15 companies listed on the New York Stock Exchange (NYSE). These 15 companies have a total market capitalization of $172 billion. The current average price of these stocks is $26.54 per share. At the end of the first quarter of 2007, the cash cost of production from the 11 gold producers on the NYSE was $261 per ounce (doesn't include the silver producers, the platinum-palladium producer Stillwater Mining Co. (NYSE: SWC, Stock Forum), and Peruvian based Buenaventura, which doesn't report gold cash costs). The average realized gold price for these companies in Q1 '07 was $617 per ounce. Thus the spread (the difference) between the average for Q1 '07 realized gold prices and cash costs was $356 per ounce. In Q1 '08 the average cash cost for the same 11 companies was $332 per ounce while the realized gold price was $925 per ounce. The spread of the averages for Q1 '08 was $593, an increase of $261 an ounce over the spread for Q1 '07.

InsideMetals reports on 15 companies listed on the American Stock Exchange (AMEX). These 15 companies have a total market capitalization of $8.16 billion. The current average price of these stocks is $3.82 per share. At the end of the first quarter of 2007, the cash cost of production from ten gold producers on the AMEX was $432 per ounce (doesn't include the silver producers, Apex Silver Mines Ltd. (AMEX: SIL, Stock Forum) and Endeavor Silver Corp. (AMEX: EXK, Stock Forum), the platinum-palladium producer, North American Palladium Ltd. (AMEX: PAL, Stock Forum), and Western Goldfields Inc. (AMEX: WGW, Stock Forum) which was just starting commercial production in early 2008). The average realized gold price for these companies in Q1 '07 was $651 per ounce. Thus the spread of the averages for Q1 '07 was $219 per ounce. In Q1 '08 the average cash cost for the same 10 companies was $512 per ounce while the realized gold price was $906 per ounce. The spread of the averages for Q1 '08 was $394, an increase of $168 an ounce over the spread for Q1 '07.

InsideMetals reports on five companies listed on the NASDAQ. These five companies have a total market capitalization of $13.75 billion. The current average price of these stocks is $29.21 per share. At the end of the first quarter of 2007, the cash cost of production from three gold producers on the NASDAQ was $429 per ounce (doesn't include the silver producer, Pan American Silver Corp. (NASDAQ: PAAS, Stock Forum), and royalty owner Royal Gold Inc. (NASDAQ: RGLD, Stock Forum) which doesn't operate any of its mining interests.) The average realized gold price for these companies in Q1 '07 was $595 per ounce. Thus the spread of the averages for Q1 '07 was $166 per ounce. In Q1 '08 the average cash cost for the same three companies was $523 per ounce while the realized gold price was $904 per ounce. The spread of the averages for Q1 '08 was $381, an increase of $215 an ounce over the spread for Q1 '07.

The rise in realized gold prices is outpacing the cash cost of mining, and should continue over the balance of 2008.

From the above analysis of the financial character of each of the above stock exchanges with respect to their listed gold producers, it can be observed that the much larger companies on the NYSE are less affected by rising costs than either the companies on the AMEX or the NASDAQ, as evident from their much lower cash costs. There are several reasons for this. The NYSE companies have greater financial resources, which allow them to get preferred financing. These NYSE companies also have experienced managements which have successfully built numerous mines in diverse regions of the world, which include prolific mining districts where having existing adjacent infrastructure greatly reduces costs.

Many of the AMEX and NASDAQ listed companies are single-mine companies and some of them are located in politically unstable countries.

Investors long on gold will be rewarded for their investment in the NYSE gold producers.