Home » gold » You’re Not Imagining It — The Gold Miners Are Tanking

You’re Not Imagining It — The Gold Miners Are Tanking

by John Rubino on June 17, 2011 · 60 comments

Conventional wisdom — backed up by years of observation — states that gold mining shares tend to outperform the underlying metal in good times because they’re “leveraged to the price of gold.” That is, their extraction costs are more-or-less fixed, so when gold rises, most of the increase flows directly a miner’s bottom line, increasing its earnings at a rate that exceeds the metal’s move.

With gold near a record, most miners should put up ridiculous earnings in the year ahead, which should make their shares act like tech circa 1998, right?

Nope. The biggest miners, whose shares populate the GDX gold miner ETF, did outperform gold (represented here by the GLD ETF) during most of its recent epic run, just as you’d expect. But in April the two trends diverged, and lately the divergence has become a chasm. Gold is up 22% in the past 12 months and the big miners are, as a group, virtually unchanged.

This is painful and humbling for investors who bet on gold by loading up on mining shares, only to discover that they were right on the macro but wrong on the implementation. But one person’s pain is another’s opportunity, and the market appears to be offering a whopper here.

Assuming that the long-term relationship between gold and the miners holds — and there’s no reason to think it won’t — then the trend lines will converge at some point in the coming year. This can happen in several ways: They can both fall, but gold more than mining shares. They can both rise, but mining shares can rise more. Or gold can tread water while the miners go up.

Which means there are two ways to play it: Buy the miners and ride them, which will work if gold goes up. Or short gold and buy the miners, in which case you don’t care where gold goes as long as the miner/metal relationship reverts to normal. The first is simpler but only works in a rising gold price scenario. The second is an arbitrage that should work no matter what gold does in the year ahead, though it carries an emotional price, since shorting gold is disturbing on a lot of levels.

On the other hand the idea of making money while being short gold — in the middle of a global currency meltdown — has a certain contrarian appeal.

One final thought: If the big miners are underperforming because of fears that they can’t replace the reserves they’re consuming, then we’re in for a buyout binge as they use their rising cash flow to gobble up the juniors with the most accessible reserves. So the small-cap miners will end up being the best part of this market.

{ 51 comments… read them below or add one }

sj June 17, 2011 at 7:38 pm

Consider:

1) Input costs are higher due to inflation.
2) Most of these companies’ profits could get confiscated by (windfall) government taxes when gold gaps up.
3) In deflation cash (gold) is king. Remember these companies make paper profits by mining ore and selling it to refiners. The next financial meltdown could take the majority of these companies down with it. The assets in the ground will be claimed by creditors, not shareholders. I’ll take the stuff that is already above ground and refined….its safer.

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Geoff June 17, 2011 at 8:48 pm

Agree with SJ: no political risk with holding gold I bought for cash at a coin show that no one knows about.

Gold mining companies? One word: “seizure.”

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paper is poverty June 17, 2011 at 9:23 pm

Funny, the reason I originally bought miners was to diversify away from having 100% physical metals because they might be confiscated. FDR confiscated gold, but not Homestake Mining shares. I’m not predicting the same thing, just pointing out that owning physical in your hand, physical overseas, and a variety of miners is a sort of diversification plan against confiscation. But if you were smart enough to buy all your metal in person and in cash, I guess you needn’t worry… I wasn’t knowledgeable enough to do that when I started buying.

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van moose June 20, 2011 at 9:38 pm

I know what you mean, try the Bank of Nova Scotia, the purchase form is in sextuplicate, probably including a copy for Homeland Security. You need a heavy hand to do copy 6.

Confiscation is scary. No question, and another country is good, there are various defences. But i consider it all too real.

Now i will really alarm you, we cannot eat our physical, at some point you may want to draw on it, or some, to eat, pay bills etc.

Look at Kitco, look at Forex, what if they knock out all the potential places where you could sell some, then you have an inert asset with nowhere to go.

Are we in a cunning confiscation substitute as they knock out these buyers? I would keep a very sharp eye.

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Jason Emery June 17, 2011 at 9:00 pm

The gold miners’ trailing PE ratios have dropped over the last several years. NEM and ABX are both in the 12 PE range. GG, AUY, KGC, and PAAS are all in the 18 PE range. Others are much higher. Kind of a mixed bag.

I’m sort of surprised that gold (and silver) miner stocks have experienced so much multiple compression over the last couple of years. Probably won’t change going forward, though. If gold miner stocks are to go up, it will have to be with increased earnings, not multiple expansion, I’m guessing.

Probably better to own the metals, not the stocks.

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paper is poverty June 17, 2011 at 9:15 pm

Thanks for this post, that divergence is pretty amazing! Incredibly frustrating for those with miners.

Some time back the Financial Sense guys did a series on the various ways in which Wall St suppresses the miners’ share prices, e.g. by naked shorting, manipulations in the last 15 minutes of the day, etc. And recently Jim Sinclair addressed the issue of Wall St constantly shorting these miners, in an interview that seemed to take for granted that the short positions are very large and definitely suppressing the price.

If Wall St (either on behalf of the fiat money crowd or just as a trade) has been suppressing these prices, then it’s another proverbial beach ball being held underwater. The only trouble is, with stocks looking so precarious, liquidity drying up, Greece about to vote on whether to default or not, etc, I just can’t see buying any equities at all. Let the crash come first, and then I can’t wait to back up the truck and then forget I even own them for about 5 years until it’s time to cash out.

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SloandEZ June 17, 2011 at 9:36 pm

Run that divergence chart back a couple of years and you will see the same digression with the miners thereafter snapping back in no time at all for a 17% gain.

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Bruce C. June 17, 2011 at 10:19 pm

First of all, gold mining stocks are, first and foremost, stocks and will ORDINARILY reflect the overall equity market. The broad equity markets have fallen since May 1 (ever since poor Rosenburg’s undoubtedly regretful Mayday capitulation, presciently timed by JR (see http://dollarcollapse.com/economy-6/equities-have-achieved-a-holy-grail”-sign-of-a-top/)) and so have the mining stocks, and will probably continue to track the overall markets until there is the kind of paradigm shift that most off-WallStreet websites portend.

Historically, mining stocks have outperformed their metal products for the fundamental reasons given (market price less (relatively) fixed costs equals more profit) but that kind of heady math escapes the trading herd until gold is suddenly taken seriously (again). As long as stock investors are comfortable with the dollar-centric world view, gold and gold miners are somewhat of a sideshow. Not until a critical mass of them finally get that gold is the ultimate money (or currency par excellence) will the paradigm shift.

Right now it’s still, ‘ the dollar, or the euro – no, the dollar…I think… or the yuan maybe…but not yet…but not gold…gold is in a bubble and is too high and, besides, it’s useless.’ Et cetera.

In the meantime, I’ll be buying some GDXJ (an ETF of “the juniors”) soon, and maybe some more GDX (or Tocqueville Gold Fund, a mutual fund managed by John Hathaway). M&A (mergers and acquisitions) are very likely since the juniors will have absorbed the cost of discovery and that is always a boon for investors.

As sound as all of that reasoning may be, I still don’t know much (anything?) about the mining business and I’ve read that mining companies are notorious for being poorly managed. Nevertheless, I still think that PM mining stocks are one of the better equity classes to own because they have done well historically as the best inflation hedges. When one has money held captive in 401ks, etc. one doesn’t have a lot of choices: bonds (paper), stocks (paper), or cash (paper).

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clive June 17, 2011 at 10:19 pm

Many hedge funds at the moment have an investment strategy of long gold and short the mining stocks which explains the underperformance.

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Mitch June 17, 2011 at 10:39 pm

Your last comment on big devouring small for replacement is part of an overall pic of the massive profits the big miners will make and what to do with all that cash.
Rhetorically speaking, the supply of gold & SILVER is finite. Silver is due another huge run or two because the hugely elevated price of gold to come and its’ demand and scarcity multiplying almost exponentially !! With central banks, hedge funds, ETF’s, pension funds, industry, & Joe Schmoe throughout the world snapping up ALL gold supply instantly, the previous stated buyers will turn to silver, as the poor Joe Schmoe is already doing !!!!
This scenario will bring silver to its’ historical gold/silver ratio price or better !!!
With the world central banks having printed/still printing fiat cash/toilet paper (currency devaluation/gold inflation) and SOOOO much more of the worlds populace possessing the means, the coming market panic along with the ACTUAL supply/demand factors will launch these precious metals to heights few can foresee.
NOT A BUBBLE !!! Gold and silver are not TULIPS !!!!!!!!!!!!!
the sighted,
Mitch

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Ventureshadow June 17, 2011 at 10:54 pm

With gold miners generally not rising along with the gold price, the market is saying that either the gold price rise will not hold or that something will impair gold mine operation.

The crystal ball says that if the economy achieves stability and does not break down, the gold price rise will not hold. It also says that if economic disorder occurs mine operation will be impaired. Either way gold stocks lose.

There is of course a middle course where the economy continues to function but people are largely unemployed and unproductive. I imagine this is the likely course, and in it gold retains value and gold mines are profitable. Apparently Mr. Market and I do not agree, so I must be wrong.

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Economic Collapse June 17, 2011 at 10:57 pm

Ron Paul’s stock portfolio is interesting: http://www.economicpolicyjournal.com/2011/06/ron-pauls-stock-portfolio.html

Given Paul’s sophisticated understanding of markets and knowledge of monetary policy, it looks to me like in the long term mining stocks are still very bullish.

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Grimm Reaper June 17, 2011 at 11:50 pm

We need also to remember that through their outsized influences (no position limits, HFT algos) at Comex and LME, JPM and the other banksters are in firm control of the price discovery process for many metals. Doubtless one of the reasons that JPM is short so many silver contracts is that they may have long-term purchase contracts and derivatives with miners; in effect, they may have induced the miners to sell off their upsides to the banksters long ago…

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Anonymouse June 18, 2011 at 12:03 am

Dear John, Normally I enjoy your writing and assumptions–however, here we must agree to disagree. Gold [and miners] should have outperformed in 2004, who could have predicted the FED would have continued to be so irresponsible in its policies—currently mining stocks are being shorted by large entities while they buy paper bullion [the miners come up a bit] , they ride the bullion up as the weak buyers jump in –then they dump bullion causing the weak hands out and the weak miner holders panic forcing the prices below the short prices–then the large entities cover–making money both ways…

The stock market and bond markets do not have sustainable fundamentals–they will descend steeply–the dollar will descend steeply–there is little bullion that will be available for delivery leaving the only gold left in the ground–owned by the miners…

The portfolio managers will panic looking for companies with earnings—the miners will be booking huge earnings–

Your assumptions are based on recent events not on over riding fundamentals–can you make a case negating the above facts/fundamentals?

Best Regards,

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CHUCK ADKINS June 18, 2011 at 2:00 am

JUST A LITTLE HUMOR TO BREAK THE SERIOUSNESS OF THE MOMENT: IF WE CUOLD INVEST IN THE PAPER ON WHICH OUR CURRENCY IS PRINTED, WE’D HAVE A SURE WINNER.

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Kane June 18, 2011 at 2:32 am

I am following several spread charts of GDX to other ETFs or stocks, and found that GDX will still under perform than others. For GDX:GLD spread, there is no signal that the down trend will end. So my strategy is still shorting GDX and buy GLD.

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Black Water June 18, 2011 at 10:23 am

Indead, paper = poverty and let’s face it, the only thing to be into Gold (and silver) is the FYSICAL one , and only to PROTECT your actual wealth….certainly not to speculate. Besides with which currency are you going to measure gold and silver when most currency’s have reached a value near to zero ..?? With buying fysical, they maybe know how much you’ve bought, but nobody know’s how much there’s left because of using it as a payment,swap etc…. It’s not inflational and you can not print or copy it…..Ever considered that desperate times calls for desperate measures, and gouvernments can react like rats when they are threatened so don’t be shocked when they NATIONALIZE these goldmine’s and you own NOTHING anymore…get it ?….The annoying thing is that all this fraud with paper money is designed by (our gouvernments) big bankers and multinationals and we, the common peoples have to pay the bill….. R.I.P.

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Brad Thrasher June 18, 2011 at 10:48 am

I like the strategy but won’t be implementing it, yet. Essentially, JR is calling for a 25%-33% drop in physical as we saw a couple years back IIRC. Gold went from 1000 to about below 700 followed by the current rise to 1500 with occasional pullbacks along the way. Is physical set to pull back and test price support levels. JR presents a sound strategy on the physical side of it. The idea that the bears will dominate physical before another bull is good sound argument.

I’ve been following JR here for a couple years. Reading about you guys and gals trading strategies and wanting to get into the game.

We have physical in the form of Maple Leafs. Always said that when gold hit $1500 we’d sell but instead I established a stop loss of $1170 which is near a major price support and my comfort level. This is why I like JR’s strategy. Heck, I’m halfway there already.

Otherwise, we’re invested in the system. A FERS (Federal Employee Retirement System) and a TSP (Thrift Savings Plan) that is 100% Gov’t Bonds. The TSP matches up to $5k per year plus 1% of your salary whether you invest in it or not. We max to the match every year. (Aside to Bruce C. when you write, “When one has money held captive in 401ks, etc. one doesn’t have a lot of choices: bonds (paper), stocks (paper), or cash (paper).” You’re talking to me Bud, lol. But matching plus 1% is simply that offer I couldn’t refuse.)

We recently moved out of the big expensive city and into the mountains which has lowered our overhead by $1000- 1100 per month. And given us more house, go figure. Yes you can still find more for less in today’s market if you’re willing to adjust. We become debt free in September!!!

Which is all to say, come October I’m opening first trading account and will be funding it at $300 per month. Yeah, pretty small potatoes. This summer, I’m practicing on FOREX, studying teh TD Ameritrade Options platform and reading about puts, calls, strike price, in and out of the money etc. tons to learn. Also studying Getting Started in Options by Michael C. Thomsett.

If you have any suggestions for my reading and education please offer. I tried watching Options Trading a couple of time recently but must admit, I’m can’t keep up with the rapid fire theory and lingo yet. Adding Bloomberg which is more my speed and taste.

I figure if the world as we know it ends, it won’t matter much. I will have had some fun and learned a ton. If I’m as smart as I think I am, in a couple-few years I’ll buy all or a chunk of an NHL hockey team and have even more fun.

Life is good.

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Brad Thrasher June 18, 2011 at 12:13 pm

P.S. Also taking the Beginner’s Tutorials at Investopedia and of course devouring the stuff in this site. If you haven’t taken advantage of it yet, John maintains an incredible library under the Best of the Web and Breaking News sections.

One thing I don’t get is how a guy as smart as Rubino is Austrian/Chicago school and not a Keynesian. Must be his blind side. We’ve all got at least one ;)

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bruce June 18, 2011 at 9:01 pm

Youth….it seems like just yesterday….

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Brad Thrasher June 19, 2011 at 5:19 pm

58 years young. That pic is my grandson. We’ve always saved. Saved for this, saved for that type of saving. Now is the first time in our lives that we’re making a conscious effort to live BELOW our means.

I’ve only ever made a handful of investment decisions in my life. There’s a treasure hunt quality to trading that I find appealing. This account isn’t about investing so much as it will be about trading. I could take my $300 a month back to hustling scared/stupid money at the poker table but been there done that.

This is a new challenge.

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Kreditanstalt June 18, 2011 at 12:42 pm

Don’t talk nonsense. There is absolutely no way much of the world will not face raging price inflation. Physical gold is cheap at today’s prices. Therefore it will rise in terms of US dollars and probably most other currencies as well.

The miners? Well, the market thinks they are stocks. So we’re going to have to wait for some event or situation which makes the mainstream stocks they love so much – retail, industrial, transports, pharma, banks, the LOT – unattractive.

Let’s try falling sales, higher unemployment, raging price inflation, stagnant house prices, liquidity crunch AND peanut bond yields. STAGFLATION. NOT good for mainstream stocks – or their dividends…

Jim Sinclair: “You’re silly to sell a gold-based asset anytime now!”

Patience. Load up now if you’re not already in…

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Rx_ June 18, 2011 at 3:43 pm

The article leaves out something that has been reported. JPMorgan (yes “speculators” have an actual name) are now heavy investors and like gold and esp. silver have a profit incentive to keep prices low.
If someone is in the business of making hundreds of billions profit by selling paper assetts, and have hundreds of billions in profits at stake if the dollar debts fall in value…
How big of a streach is it to put a very few hundreds of millions into short positions to prevent the masses from exiting paper debt for hard assets?
It is not some grand complex conspiricy, it is just free-market management.
It is no secret that JPM controls the trade of over all 50% of “paper silver” each market day that each day represents almost 1 year’s entire production of silver mining. That is a published fact by the Commit Of Traders. It is absolutely insane from any enocomic or trading point of view, but there it is in black and white.
The Federal Reserve Board (a very close friend of JPM) has a huge intrerest to prop up the beleif that fiat currency has value. It is no streach that JPM loose change (in fractional reserve terms) can control the gold mine industry.
As the article correctly points out, this applies to the huge companies, not the little juniors.

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Sj June 18, 2011 at 6:03 pm

Paper is poverty

The purpose of nationalizing gold in 1933 was to break the convertibility so that the dollar could be devalued vs. Gold. There would be no purpose to confiscate gold at this point, unless the gold in fort Knox doesn’t exist. If that were the case then your better off owning lead coated with copper….

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Sj June 18, 2011 at 6:04 pm

Even if no gold exists in fort Knox, the Fed could print money and buy the gold on the global market to replenish it….

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Len June 18, 2011 at 7:37 pm

Since 2006, the ratio of GDX(gold miner EFT) and GLD (gold ETF) fluctuates between 0.66 and 0.25. Now it is 0.35. It is on the low end, but not quite yet because it is still going down. A safe play in the gold market is to buy GDX and sell GLD when the ratio is below 0.30 and to sell GDX and buy GLD when the ratio is above 0.6. By swapping between these two, you will do well in the gold market, and without investing extra money, you will see your gold portfolio grow. Trade only once a year. Be patient.

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Brad Thrasher June 19, 2011 at 2:44 pm

Hey Len, can you link to a chart? After a search, I don’t see one that shows the fluctuation (0.66 – 0.25) Maybe I’m not reading them right but I don’t see it. Thanks.

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TheDean June 19, 2011 at 2:28 am

I’m responding because this site has serious, intelligent responders, vs the emotional flack found on other sites.

I agree that the miners are more at the mercy of the hedge and pension funds who deal in stock and bond investments. Just look at history chart comparisons with mining stocks vs S&P & DOW. When the “100th monkey” realizes what is going on with paper vs gold, miners are off to the moon!

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ChicksDigIt June 19, 2011 at 4:22 am

Maybe thats because Phase 1 of the Silver Viral Project is convincing paper gold and silver holders to sell and convert to physical silver!
Phase 2 is propagandizing the masses on physical silver!
Join The Doc’s revolution…we can take Silver Viral!

http://silverdoctors.blogspot.com/2011/06/silver-viral-project-guidebook.html
http://silverdoctors.blogspot.com/p/silver-viral-project.html

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Richard Hammers June 19, 2011 at 6:08 am

I bought silver in 09′ at $16 and cashed out at $45. I think gold will max out at $6000 during a crisis and then level at $5000. However, I also think this fall and spring 2012 we’re going to see gold drop 10% before another QE3 is implemented, in time for election, which will push assets up again.

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old toade June 19, 2011 at 6:42 am

Looks to me like a raid, planned and executed to assist in cooling down these PM markets or simply for the wealth acquired in the process. I think it has another leg down for a “proper” correction, and sets up the opportunity for them to load up on miners and explorers of all key commodities and O&G for that matter.
Since last year the metals markets have enjoyed stronger buyers world wide. The big shorts experienced an “elastic” market that rebounded overnight nearly every time market drops occurred. They reduced some of their short positions when that was politically expedient, but did not succeed in changing the rising trend from last Aug.. as gold has seen only mild chills or tremors thusfar. Consider the 5 margin hikes on Silver in less than two weeks to end silver’s rise as an inconvenient truth regarding tactics.
My opinion is the GDX, GDXJ markets did not have the same sources of world wide strength, i.e. they had a higher percentage of weaker hands, and provided a good target.
The continued strength in gold seems like it is due to a steady commitment of major buyers; world wide buyers.
Gold will be a component in determining valuation of currencies internationally but some other commodities might also be similarly ensconced in this “future valuation scheme”. This certainly seems to be a practical observation if the people of the world are involved in decision making, however if they are not, if current leadership (behind the stage) survives in the future, which is more likely- they may choose whatever path suits them, and we will be in the thick of a depression.
Gold may be worth a lot then, but you may fear using it here. Nobody knows what will happen, that’s true, but I have respect for the opposition, and have yet to see the public stir from their slumber, except if their government checks are threatened. So maybe going long mining shares now or soon, is safer.

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W G Thompson June 19, 2011 at 6:45 am

If this notion that a solar flare will
incinerate the Western Hemisphere in
2012 gains any traction, nothing will
avail except gold & silver coins in
small denominations. A disaster like
that would close all stock exchanges,
and render paper of any kind worthless.
Bye-bye Division of Labor and the Agro
business, hello Cheyenne Mountain in
CO, where the elites will all gather to
celebrate their own cleverness. When
they get safely inside, let’s weld the
doors shut and feed them vegetable
alkaloids. Then, finally rid of Wash-
ington, we can rally around our natural
geographic centers and rebuild along
simpler lines. Four nations? Sounds
plausible. WGT

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Joe June 19, 2011 at 6:02 pm

I think the idea of miners vs metal makes good sence.
Just Make sure you know what you posting!
The Dean is for sure right.
Brad, I think you are not.
John. You are correct about the stocks and gold and what we should do.
Thanks for the psot

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Bill Brown June 19, 2011 at 9:15 pm

I have converted most all of my paper assets into hard assets, simply because hard assets can’t be printed. Hard assets have limits in relation to supplies, not so with paper. While a country can change it’s currency and it’s value, it takes the world to change the value of hard assets like Gold & Silver.
If/When the dollar does fail, the value will be zero and Gold and Silver wiould be revalued into another currency………. dollars won’t be revalued at all.

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Federalist45 June 20, 2011 at 11:18 am

The only way the miners are a bad investment at this point is if there is a total collapse. Otherwise, the miners are going to be huge winners, as their share prices are so low compared to the price of gold and silver. As gold and silver soar 20% each year for the next 5 years or so, the best miners will soar 100%.

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Eric June 22, 2011 at 7:23 am

You must always keep in mind that the currency in which your paper investments are denominated may be worthless in the future.

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Brad Thrasher June 20, 2011 at 12:05 pm

As noted above JR always offers a wealth of info linked to his posts. Here’s a nugget on small miners from Louis James of Casey Research. James offers direct evidence that the buyout binge might be just beginning.

http://www.theaureport.com/pub/na/8965?

Who’d a thunk that legal research is so similar to financial research :)

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Brad Thrasher June 20, 2011 at 1:30 pm

And here’s another from Seeking Alpha http://bit.ly/lbil3f

Also found a small-mid cap gold miners ETF. GDXJ is analyzed/reviewed here http://bit.ly/laWd8O

As JR notes, the arbitrage position is a tough one because the fundamentals, supply and demand for physical gold weighs against it. The current conventional wisdom macro theory does support a decline in the physical gold price resulting from a slowing/double dip of the global economy that causes the fat cats to re-position away from commodities. Hedge and pension funds treat commodities as growth plays.

They’ll (hedgies & pennies) re-position back into commodities at the first hint of QE3.

A call on GDXJ is going into my trade simulator. It’s soooo tempting to do this one for real. Especially if James is right that a buyout binge is actually emerging right now. As to the arbitrage side? Jeez that’s tough. Perhaps on further review.

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Martha Lewis June 22, 2011 at 2:43 pm

I recently became curious about the economy crashing & gold prices. I’m worried about having all my savings in a bank & the dollar collapsing. Would anyone reccomend buying gold as an alternative to using a savings bank? Or would it be best to open an account in another country?

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Brad Thrasher June 22, 2011 at 8:31 pm

Hey Martha,

First I’d suggest that you keep monthly expenses in a bank and get the rest of your cash into a small, stable local credit union. You want to have 90-180 days expenses in cash or near cash, (gold and silver) available at all times.

Second, in a crisis you want your gold where you can get it. That’s I’m wary of keeping gold outside the USA.

All the best,
Thrash

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paper is poverty June 23, 2011 at 1:34 am

If you have savings you won’t need right away, I’d take some portion of that and buy gold (and perhaps silver). You don’t have to decide on what proportion to put into metals right away… just get started with a small purchase of government-minted gold / silver coin(s). And/or plan to take a small amount every week or month and move it into gold / silver. That way you’ll have at least a little insurance against a faltering currency while you learn more and make further decisions.

A savings account at a bank in another country doesn’t sound like any improvement. The banking system is so interconnected that a bank holiday in one major economy might cascade into banking holidays in much of the Western world, who knows? And there is no country with sound currency; it’s all fiat, everywhere you look. A foreign currency account also has the additional risk of capital controls, meaning it might become very difficult to bring that money back into the country.

Have you read John’s book, “The Collapse of the Dollar”? It’s easy to read, and should help you decide what to do.

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Vince O June 22, 2011 at 6:25 pm

thanks for the GDXJ tip in earlier posts she’s a screamin now…bought it on the floor I reckon? Just wish I bought more.

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Brad Thrasher June 23, 2011 at 11:46 pm

yer welcome. As you can see by my pic I’m a tad more seasoned than that E-trade kid.

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Bruce C. June 24, 2011 at 9:38 pm

ETFs are not necessarily the best way to invest in equities. Their main advantage is that they are suitable for trading since they can be bought and sold at any time during market operations. Other than that they are probably not what many of you think they are (i.e., essentially stock mutual funds), and that’s especially true of ETNs.

For longer term holdings (which I would consider mining shares to be in this environment) of nearly direct equity ownership, mutual funds are generally the better choice. This is especially true if you intend to “dollar-cost-average” in relatively small increments because you generally would not have to pay a transaction fee for each purchase.

ETFs are also generally not managed in your behalf, unlike the best mutual funds which are. There is a reason that ETFs are Wall Street’s most profitable financial product. They are derivative products on futures options. Also, “they” know that those who buy ETFs are much more likely to trade them frequently. Need I say more?

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Brad Thrasher June 27, 2011 at 11:15 pm

Hey Bruce C.

Trader/investor and/or trading/investing are kind of ambiguous terms. You seem to use them interchangeably. How do you define each? When you use a phrase like, “longer term holdings” are you talking 6mos or 6 years?

Best@U

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Bruce C. June 28, 2011 at 12:21 pm

Hi Thrash,

Good question. Personally I use the word (stock) “investor” generally to mean any one who buys and sells stocks to make money via income and/or capital gains. By “trader” I mean one who buys and sells frequently (say, at least once a few times a month, if not daily) and “a long term holding” would be for at least a year (so that it qualifies as long-term capital gains).

I don’t have a particular word for one who trades every few months or so, which is what one would have had to do for the last year or so to profit from all the crazy volatility. My point was that trading (frequent buying and selling) seems to be addictive and is more like gambling in that statistically most traders ultimately lose to “the house”. That’s why Wall Street likes ETFs.

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Howard Schrock June 25, 2011 at 3:07 pm

Are there any gold miner stocks which pay a decent dividend, while we wait for the big move up? We retired people need some living expense money to live on while we wait for the dollar decline! Thanks for your advise!!

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Brad Thrasher June 27, 2011 at 8:14 am

Hey Howard,

This link http://bit.ly/5Zk6Ob tracks 13 gold and silver mining stocks taht pay dividends.

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Wall St. Banker June 28, 2011 at 11:39 pm

I don’t think gold miners are tanking. Short term going down, long term through the roof! Make sure you sell at the high (mining stock) and make sure you already have enough gold/silver/food/bullets for three years minimum. Selling at the high, use your dollars quickly to buy something else, ANYthing else.

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Mike Sanders July 31, 2011 at 2:03 pm

I have been following the collapse of the dollar and the US economy in relation to Bible prophecy. One site I follow on End Time prophecy has a few articles that point to the United States being out of the picture in the End Time events. Is the economy the reason the United States is not a player in the last days?

http://howlongolord.com/?p=36

Muslim Prophecy

http://www.forbes.com/2008/10/26/obama-iran-ahmadinejad-oped-cx_at_1026taheri_print.html

“Is Barack Obama the ‘promised warrior’ coming to help the Hidden Imam of Shiite Muslims conquer the world?” asked columnist Amir Taheri in Forbes. “The question has made the rounds in Iran since last month, when a pro-government website published a Hadith (or tradition) from a Shiite text of the 17th century. The tradition comes from Bahar al-Anvar (meaning Oceans of Light) by Mullah Majlisi, a magnum opus in 132 volumes and the basis of modern Shiite Islam.

“According to the tradition, Imam Ali Ibn Abi-Talib (the prophet’s cousin and son-in-law) prophesied that at the End of Times and just before the return of the Mahdi, the Ultimate Saviour, a ‘tall black man will assume the reins of government in the West.’ Commanding ‘the strongest army on earth,’ the new ruler in the West will carry ‘a clear sign’ from the third imam, whose name was Hussein Ibn Ali. The tradition concludes: ‘Shiites should have no doubt that he is with us.’”

The Khomeinist establishment in Iran sees Obama’s rise as another sign of the West’s decline and the triumph of Islam and the return of the Mahdi.

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Apocalypto January 27, 2013 at 4:49 pm

In the event of a dollar collapse, how can anyone argue that gold miners will benefit from the surge in the value of gold? All assets are quoted in terms of fiat currency, so, to suggest and follow the logic that if the dollar goes to zero, gold miners will surge (in dollar terms) along with gold, becomes a bit of a paradox. Any company’s market capitalization is quoted in FIAT terms NOT gold or silver terms regardless of what they do. They can be airlines, banks, miners, healthcare, technology companies—-it doesnt matter, because the MEDIUM of exchange and valuation itself has been decimated. THE economy would cease to function until a new gold standard was created. For example, if you own a gold/silver miner priced at 20.00 dollars a share when the dollar collapses and gold’s value rises, the value of that miner can no longer be expressed in DOLLAR terms. Gold itself becomes the new medium of exchange, and GOLD itself could not be expressed in dollar terms either. Bottom line seems to be…own the ACTUAL commodity and be able to lick it, smell it, and touch it with your own hands

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