Gold was down 4.98%. for the week, meanwhile the HUI was down 13.17%, and silver was down 11.19%.

This means that gold stocks declined the usual 2.5 times more than gold, exactly the leverage we have been monitoring since May 2019. Since the top of Hui of 260 of last week gold stocks declined 17.2%, 2.29 times more than gold’s decline since the top.

I guess lot’s of investors think it is the time to buy gold stocks now. Guess what , it ALL depends what the gold price will do!

There are some mid Cap gold companies that are undervalued after the recent sell off, but at current gold price, most senior gold names remain fully valued and just act as call options on gold as they always did. Additionally there remains the risk of bad management, cost inflation, and geopolitical stuff.

That’s why it is always better to focus on physical gold and not the miners, just what FullGold stated here last week. I believe after this terrible sell off it has been proven again that small cap gold stocks and silver names should be avoided or only be a very minor part of a portfolio. At current silver price, 80% of silver producers is hardly making any money, so buying these names is like buying an out of the money call option on silver. Bigger gold stocks could be fine and are making strong cash flows at current gold price, but will only go up if gold goes up strongly. Forget all the stories about how cheap gold stocks are, this is not the case.

I am however not bearish about the potential of gold stocks to outperform gold going forward. If gold would go up 15% from here go to $1800, the GDX could be at 36 level, based on fundamentals and the 2.5 gold stocks leverage.