Here's a statement of the obvious: The opinions expressed here are those of the participants, not those of the Mutual Fund Observer. We cannot vouch for the accuracy or appropriateness of any of it, though we do encourage civility and good humor.
On paper they are oversold. But with gold prices declining towards $1300, a lot of gold mining companies will have difficulty turning profits. These are highly leveraged operations (high debt) so they might not be as cheap as they were once perceived to be.
Reply to @Investor: Good point...this sector seems ripe for mergers and acquistions, especially where known reserves exist, but current balance sheets are not sustainable.
Gold stocks have underperformed bullion pretty much for this entire bull run. For this to reverse, you'd have to see much lower prices for bullion and a continued bull market in equities.
I do question that statement that 'gold bugs have been bugging out over a sharp decline' - this was written to be cute [gold bugs - bugging out] but is hardly the truth. The gold bugs and I don't consider myself one by a long shot are the long term strong hands. They didn't do any selling. The sellers were the hedge funds and hot money and folks that had gotten in because it was 'the thing'. These were all the weak hands that were shaken loose by the price drop.
We'll have to see but we're already starting to see divergence between the paper price and the street price of bullion. This leads me to believe that a lot of the drop was market driven rather than based upon fundamentals. If this is the case, you should see buyers start shopping at these depressed prices.
I do think the heyday of the bullion ETFs and everyone buying a little are over. ETFs are perhaps one of the dumbest ways to invest in precious metals. They're completely subject to outside forces in one of the most highly crafted markets. They're taxed at 28%. I really doubt they could 'stand and deliver' the bullion they are supposed to have and there's quite a bit of doubt about the how genuine the bullion they do hold really is.
Comments
Good point...this sector seems ripe for mergers and acquistions, especially where known reserves exist, but current balance sheets are not sustainable.
The sector trend still appears downward moving.
Gold stocks have underperformed bullion pretty much for this entire bull run. For this to reverse, you'd have to see much lower prices for bullion and a continued bull market in equities.
I do question that statement that 'gold bugs have been bugging out over a sharp decline' - this was written to be cute [gold bugs - bugging out] but is hardly the truth. The gold bugs and I don't consider myself one by a long shot are the long term strong hands. They didn't do any selling. The sellers were the hedge funds and hot money and folks that had gotten in because it was 'the thing'. These were all the weak hands that were shaken loose by the price drop.
We'll have to see but we're already starting to see divergence between the paper price and the street price of bullion. This leads me to believe that a lot of the drop was market driven rather than based upon fundamentals. If this is the case, you should see buyers start shopping at these depressed prices.
I do think the heyday of the bullion ETFs and everyone buying a little are over. ETFs are perhaps one of the dumbest ways to invest in precious metals. They're completely subject to outside forces in one of the most highly crafted markets. They're taxed at 28%. I really doubt they could 'stand and deliver' the bullion they are supposed to have and there's quite a bit of doubt about the how genuine the bullion they do hold really is.
That said, we'll have to see.
peace,
rono