The 'Gearing Effect' - The 'gearing effect,' is in reference to the effect you get when the share price of a gold mining company / gold mine increases, in reaction to an increase in the gold price (assuming that the productions cost and all other factors stay the same). 

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For example, let's assume a gold mine has a 1 million ounces of gold underground that still needs to be extracted, and that the gold price is currently at USD1000 per fine ounce of gold. In addition, let's assume the current production cost is USD800 per fine ounce. In other words, the mine is estimated to make USD200 million over its life. Now let's assume the gold price goes up to USD1200 per fine ounce of gold, and consider the effect this will have on the profits made by the mine, which will shoot up to USD400 million (assuming that the production cost and all other factors stay the same). Given the 'gearing effect' of 4 times in this example, an increase of 20% in the gold price will lead to an increase of 20% in the share price plus another 4 times 20%, in other words 100% (assuming that the production cost and all other factors stay the same).

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