econintersect.com
       
  

FREE NEWSLETTER: Econintersect sends a nightly newsletter highlighting news events of the day, and providing a summary of new articles posted on the website. Econintersect will not sell or pass your email address to others per our privacy policy. You can cancel this subscription at any time by selecting the unsubscribing link in the footer of each email.



posted on 12 April 2016

Surging Mining Stocks Point To Big Move Ahead In Gold And Silver

from Money Metals Exchange

-- this post authored by Stefan Gleason

Spring has sprung for precious metals mining stocks.The HUI gold stocks index surged 6.2% on Monday to close at a 14-month high. The HUI chart shows a strong base was built from last summer through this January, and from that base a new bull market has begun.

Gold Bugs Index

Industry major Barrick Gold (NYSE:ABX) has seen its share price more than double year to date, leading precious metals mining equities as a group to become by far the top performing sector of 2016. As the bull market matures, we can expect leadership to switch from the majors to the mid-tier producers, then on down to the junior explorers.

Eventually, the stocks will get ahead of their underlying fundamentals, as is always the case in momentum-driven markets. Investors will then find greater value and stability in the physical metals. Physical precious metals will at some point take center stage and outperform the miners.

For now, the miners are taking the lead and blazing a path higher for the metals markets.Gold mining stocks often serve as a leading indicator for gold prices.

Of course, on any given day, the share prices of miners can move based on business or market peculiarities that are wholly unrelated to spot gold. But when gold equities trend upward in a significant way, as they have so far this year, we can infer that some big-money investors are betting on a big recovery in gold prices. It's the gold price, after all, that is the biggest factor in most miners' prospects for realizing profits.

But it would be a huge mistake for investors to treat gold/silver mining, streaming, and exploration companies as if they were proxies for the metals themselves. Physical precious metals are an entirely separate asset class. A gold or silver coin can't go bankrupt. A mining company can go bust for any number of reasons - poor management, an environmental disaster, a credit crisis, etc. Money Metals columnist David Smith has detailed all the risks for our readers.

Historically, investors in mining companies have suffered through extreme booms and busts with little on net to show for the punishment they've endured.In fact, gold stocks have vastly underperformed gold spot prices over the past couple decades. Gold prices trade more than three times higher today than they did 20 years ago. Yet the HUI, despite its recent run up, actually trades slightly lower today than it did back in April 1996.

Let's consider a recent 10-year period. From 2006 through the end of 2015 (10 full calendar years), gold gained 104%.Gold prices finished 2015 well below their 2011 highs.But if you bought in 2006, you still made money. If you bought a basket of gold stocks, in 2006, you lost money - most of it, in fact. From 2006 through 2015, the HUI shed a whopping 60% of its value. Ouch!

Those who bought gold stocks as a proxy for gold learned a tough lesson. During favorable up cycles for gold mining equities, they can potentially deliver outsized gains compared to gold itself. But during unfavorable periods, the downside for the stocks is much more severe than it is for the bullion.

Only the metal itself has a long-term track record of maintaining purchasing power.

Only precious metals in physical form are money.

Only gold, silver, and other hard assets serve as hedges against the risks inherent in the financial system.

That's not to say that mining stocks don't have a place in a diversified investment portfolio. They can certainly deliver big returns when market conditions are favorable.Some of the majors, such as Barrick, Goldcorp (NYSE:GG), and Newmont (NYSE:NEM), even pay small dividends.

But do you buy into mining stocks now, after a lot of these names have already doubled off their lows, given the sector's track record of producing more disappointment than profits? It's a question you as an investor will have to answer for yourself, taking into consideration your own objectives and risk tolerance.

If you're looking for an undervalued investment that has similar upside potential as mining stocks but less downside risk, plus all the attributes of a tangible attributes of a hard asset, then consider physical silver.

The silver market appears to be gaining momentum, but spot prices remain well below their highs from last year.The gold:silver price ratio remains elevated at 79:1. As recently as 2011, gold sold for 32 times the price of silver, and historically it has often sold for 16 times or even as low as 10 times the silver price.

What will cause the spread between gold and silver to narrow? Most likely a big move upward in silver prices.The silver market opened this morning just above $16.00/oz, surpassing its high mark for the year.After being compressed for many months within a trading range, the silver market now sits like a coiled spring on the verge of breaking out.

Silver Chart April 2016

Opportunities to buy major breakouts into new bull markets don't come along often. If you regret missing the big rally this year in the miners, now's your chance to catch the better part of what could be an equally impressive follow-up bull run in silver.

About the Author:

Stefan GleasonStefan Gleason is President of Money Metals Exchange, the national precious metals company named 2015 "Dealer of the Year" in the United States by an independent global ratings group. A graduate of the University of Florida, Gleason is a seasoned business leader, investor, political strategist, and grassroots activist. Gleason has frequently appeared on national television networks such as CNN, FoxNews, and CNBC, and his writings have appeared in hundreds of publications such as the Wall Street Journal, TheStreet.com, Seeking Alpha, Detroit News, Washington Times, and National Review.

>>>>> Scroll down to view and make comments <<<<<<

Click here for Historical Metals Post Listing










Make a Comment

Econintersect wants your comments, data and opinion on the articles posted.  As the internet is a "war zone" of trolls, hackers and spammers - Econintersect must balance its defences against ease of commenting.  We have joined with Livefyre to manage our comment streams.

To comment, using Livefyre just click the "Sign In" button at the top-left corner of the comment box below. You can create a commenting account using your favorite social network such as Twitter, Facebook, Google+, LinkedIn or Open ID - or open a Livefyre account using your email address.



You can also comment using Facebook directly using he comment block below.





Econintersect Precious Metals


search_box

Print this page or create a PDF file of this page
Print Friendly and PDF


The growing use of ad blocking software is creating a shortfall in covering our fixed expenses. Please consider a donation to Econintersect to allow continuing output of quality and balanced financial and economic news and analysis.


Take a look at what is going on inside of Econintersect.com
Main Home
Analysis Blog
Big Mess in Italy
Are You Feeling the Economic Surge?
News Blog
Early Headlines: Asia Stocks Up, Oil Down, GOP Healthcare, Trump Not Reagan Redux, EU Ending?, UK Lost Decade, Putin Taking Over Mid-East, Yuan 'Flash' Crash And More
December 5, 2016 Weather and Climate Report - December Update - Zonal Prevails
Irish Births And Baptisms Visualised
What Happens In The Smartphone Afterlife
Water Intoxication: Are We Drowning In Advice To Drink More Fluids?
The Worldwide Virtual Reality Market Is Set To Be Huge
Average Gasoline Prices for Week Ending 05 December 2016 Rose Over 5 Cents
What We Read Today 05 December 2016
Why We Have Different Blood Types
November 2016 Conference Board Employment Index Improved.
November 2016 ISM and Markit Services Index Mixed
Are All Collateralized Loan Obligations Equal?
A Third Of Homes Sold For The List Price Or More In August 2016
Investing Blog
Momentum Issues A Warning
The Great Bond Crash Of 2016: 05 December Update
Opinion Blog
The Shale-War Is Over
Fake Science
Precious Metals Blog
Silver Prices Rebounded Today: Where They Are Headed
Live Markets
05Dec2016 Market Close: US Markets Close Higher, WTI Crude Settles At $51.09, US Dollar Drops Below 100 Temporally
Amazon Books & More






.... and keep up with economic news using our dynamic economic newspapers with the largest international coverage on the internet
Asia / Pacific
Europe
Middle East / Africa
Americas
USA Government



Crowdfunding ....






























 navigate econintersect.com

Blogs

Analysis Blog
News Blog
Investing Blog
Opinion Blog
Precious Metals Blog
Markets Blog
Video of the Day
Weather

Newspapers

Asia / Pacific
Europe
Middle East / Africa
Americas
USA Government
     

RSS Feeds / Social Media

Combined Econintersect Feed
Google+
Facebook
Twitter
Digg

Free Newsletter

Marketplace - Books & More

Economic Forecast

Content Contribution

Contact

About

  Top Economics Site

Investing.com Contributor TalkMarkets Contributor Finance Blogs Free PageRank Checker Active Search Results Google+

This Web Page by Steven Hansen ---- Copyright 2010 - 2016 Econintersect LLC - all rights reserved