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Have Miners Been Forgotten?

It’s no surprise that markets are a bit flat this week. As I looked over precious metals charts it seems that January doesn’t have an impressive record. Other than 2008, which was volatile, then ended on an upswing, January has either been flat or seen a slight decrease in gold value over the past decade.

As of this writing, precious metals are relatively flat, with gold trading just shy of 1618 (closed yesterday at 1623.70) and silver barely over 29 (closed yesterday at 29.27). In fact, every major area of the markets seems fairly anemic today, though the dollar is showing some strength, trading at 81.2.

So, what does that mean to the investor? For now, it represents an opportunity extended, especially in light of the recent increase in the dollar. In past years we’ve almost inevitably seen an inverse relationship between the dollar and gold. But in recent years that relationship seems to have been broken. Sometimes gold moves in tandem with the dollar as well. This represents changing sentiment in regard to gold.

This sentiment doesn’t always sweep an entire sector though. For example, there’s an area of the precious metals markets that might be worthy of particular attention at the moment. Mining stocks are often neglected by investors. Here are some interesting stats to whet the reader’s appetite:

  • The GDX, which represents gold producers, is down considerable this past month, from 60.41 to 51.43. Interestingly, the price was about the same a year ago as it was a month ago, 60.88.
  • The GDXJ, which represents gold’s junior producers, took it on the chin with a sharp drop in December (30.04 to 24.70) after an already tough year that started out at 39.29.
  • SIL, which represents silver stocks, dropped as well, though not as steeply, from 23.21 to 21.12 for the month, after coming down from 26.53 from a year ago.

Considering the fact that gold just enjoyed its eleventh year of annual gains, these numbers make little sense in regard to true value. Many who understand the fundamentals are investing accordingly, snatching up mining stocks at what they consider bargain prices. These prices represent averages within their respective indices, so, as always, do your own due diligence if you decide to invest in miners.

Some final thoughts before we break for the weekend:

Throughout the last year we’ve seen central bankers become more involved in the gold markets. The fallout in the Eurozone has led to some purchasing. Even Japan saw an increase in gold buying on the tail of the challenges of their earthquake, tsunami and Fukushima incident.

Perhaps the largest powder keg in the scheme of things is the debasement of worldwide currencies. These practices rape the populations of their respective countries through policies of inflation, easy money and “stimulation” in various forms.

We’ve seen a flight to the dollar in light of problems in Europe and Asia. But flight to the dollar from any other currencies is still flight from the promises of one central bank to the promises of another. There is no intrinsic value. And the only safe haven for your wealth is in that which cannot be destroyed or rendered useless by the irresponsible fiscal practices of any country. This is certainly something to seriously consider when making financial decisions.

We’ll be expanding on these thoughts throughout the year. For now, enjoy your weekend.

Sincerely,
The Gold Informant