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Mining operations have long been a backdoor way for investors to benefit from the rising price...

Mining operations have long been a backdoor way for investors to benefit from the rising price of precious metals such as gold, but this year mining stocks (GDX, GDXJ) have lagged the price of physical gold (GLD). The disparity has grown so wide that some analysts say the miners are now reasonable, but investors should remain mindful that "they're stocks… by definition, they're going to be more correlated to the equity market than the metals."
Comments (7)
  • Elementary my Dear Watson: Stocks [all of them] are dragging anchors. But ETF's are more 'simple', if run properly. When humans get their greasy mitts on a dollar chain, you can be sure they will try to 'cream' it. But as I have been saying in my comments, I am sticking [for now] with ETF's and GDXJ is my favorite PM ETF although I am in SLV and SIVR [as I have been saying].

     

    We may be on the way up now for PM's but something is nagging at me that we will see new lows before the real show begins, which is why I have not sold ANY of my positions nor physical but am waiting for a pullback before adding to them.

     

    In any case, I feel any stock has too great a risk, but as a soon to be retiree, I need to invest in something unless I want to begin to draw down my savings the day I retire.

     

    The cushion a retiree has for NOT investing is his Social Security, and ANY expenses beyond that must come from savings nor investment gains.

     

    Stick with the ETF's for now. Go with the hot sectors REITs and PM's

     

    I am short financials. FAZ a little, will prolly begin to add more FAZ soon.

     

    Capt. Brian
    The Lost Navigator
    8 Sep 2012, 08:18 AM Reply Like
  • new lows? you mean even below 1600? That seems almost impossible now
    8 Sep 2012, 12:01 PM Reply Like
  • Nothing is impossible. I tend to agree with The Captain. I've been bitten by getting a bit too greedy in the past, and you know what they say: "...once bitten, twice shy..." Doesn't mean I'm not making money in these markets right now, but exercising due caution, and keeping a close eye on my positions.
    9 Sep 2012, 10:20 PM Reply Like
  • Capt Brian: What are your thoughts on the differential of physical metal and the value of SLV? It seems to me that an ETF investing in a PM should be backed up by that amount of metal except for any premium the market might assign.

     

    I have used CEF instead of SLV for my choice.

     

    Fortylove
    8 Sep 2012, 10:26 AM Reply Like
  • You can't have the metals without the miners. Metals are bought and hoarded, thereby creating shortages. Miners keep producing to replenish stock . Look for the best juniors and a couple of the best exploratories along with GDX , and you should do real well Don't bet the farm, but alot enough to see some real gains in the long run.
    8 Sep 2012, 10:40 AM Reply Like
  • not only has gdx unperformed gld this year,it has seriously underperformed gld ever since gdx was introduced in 2006.

     

    gdx has been much more volatile than gld. for this reason I've made more money in my gdx position than in my gld position.
    8 Sep 2012, 10:53 AM Reply Like
  • There is very little connection between gold and gold miners. Gold is money; a gold mine is a business. The inputs to gold mining are real goods and services, so their dollar costs increase at roughly the same rate as the dollar price of gold. Throw in the occasional poor decision, pricing of miners as if their gold were already mined instead of as dividend-producing operating companies like any other, and the risk inherent in digging stuff you can't see out of the ground, and you have a recipe for perpetual disappointment. People need to evaluate gold miners the same way they would evaluate any other company. There is nothing magical about the fact that they produce money instead of widgets.
    8 Sep 2012, 12:55 PM Reply Like
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