Loading ...Gold Stocks (Still) Suck
Study this $XAU (Major Gold Stock Index) to $GOLD Ratio Chart
This Ratio PEAKED in 1996 while Gold was still in its Bear Market
The Price of Gold was around $400 !
Since that Point ( The Bre-X Mania and Crash) Gold Stocks had been in a steady 20 year Decline vs the Gold Price.
Yes…even all during the Y2K decade when Gold went from $250 to $1900. Gold Stocks LAGGED the price.
(HINT : You were far better of just buying Physical Gold than “playing” with Gold stocks all through this epic Gold Run. Yes Virginia its brutally true.)
Perhaps the Bre-X Fraud has still left a big stigma associated with Gold Stocks…of which Will Rogers once said.
A Gold Mining Stock is a Hole in the Ground with a Liar on top.
So far it looks like the ratio bottomed in 2016 BUT the “rally” has been uninspiring so far.
A yet Hope Springs !
Good luck !
Thank you for comments and the chart, which is (for me) enlightening and almost stunning.
A couple of disparate points come to mind.
First, one sporadically comes across critiques of the gold mining industry, more or less indicating that it is run by incompetents or near-crooks. They are good at making money for themselves usually, and for their creditors. Otherwise they’re maybe not so reliable. In this case, with XAU, we’re talking about companies that actually mine. On 10/17/2019 “Otto” at IKN posted a video from 2018 that an “Industry Professional” recommended to him https://youtu.be/AZovGptehLI about actual miners. It is one of those various critiques — from a private capital money manager — on how badly run gold mining companies are — in case anyone is interested. The bullion doesn’t have managements I guess so it can’t have bad managements. I suppose it can have storage fees, it can get lost or stolen, and so forth.
Second, it has been possible to do o.k. in this era with stocks. It is unclear to me how much is luck and how much is skill. However it can help to look at individual companies, and not invest in the worst ones — and also to look at charts and news releases to help with timing. There have been examples of companies doing really well when others have done poorly and vice versa. Keeping somewhat on top of things may help.
I looked again at the video I linked to. The person in the video also has a chart or two contrasting the prices of gold stocks to gold.
He speaks repeatedly — and harshly — of the vast amounts of capital the managements have “destroyed”.
He does indicate however that even in 2018, when the video was made, if the industry were to clean up its act (less of the short-sighted planning, less undeserved compensation for insiders and wasteful administrative expense, more consolidation of inefficient smaller producers, shedding of garbagy assets…) that the industry would potentially have a fair amount going for it…..also suggests a possibility of something like “peak gold” that managements less overall disastrous than industry standard managements of today could take advantage of. So he is speaking as a fund investor who sees long term great prospects. But he is pretty clear that the stock prices have deserved to go down relative to the metal’s price.
Oh my, that sad chart might revive re-postings here of HENRIK’s tweets…
who is still long from 1480 with 1590 target at late Nov reversal, bottoming in July at his beloved 940.
Fully, Could you also put up a Log chart of that?
It shows an even more ominous drop, yet a more promising 2016 reversal.
Log Chart
Splat
http://schrts.co/gvRvumnj
https://www.zerohedge.com/markets/fed-gives-inflation-welcome-united-states-japan
Wouldn’t it be something if these miners turn into some of the biggest businesses on the planet and major CEO’s were clamoring to get into a gig where they dig. Hmmm, it could happen. Debt implodes and gold and silver restore the system, money, cryptos, faith and the world. I’m giving this scenario 10-12% and trending. 🙂
I m officially changing to 15% and trending: https://www.zerohedge.com/commodities/sleepwalking-toward-crisis-got-gold
Oh … I’m giving it 100% probability.
I just don’t know precisely when.
The crisis comes first. Then the (back room) debate over what to do about it.
Then time for those in on that debate to position themselves to take advantage.
I’m still on record here as putting the middle of that sequence in 2023-25.
That’s when the collapse of purchasing power tapers off.
Hey Pedro! By 2023 my trending percentage will be closer to 90%. 🙂