Gold and silver are down again today, but the mining stocks are up big. One day does not a trend make, but this is still a possible indicator of several things:
1) The plunge in mining shares has finally gotten the attention of investors who understand that most of these companies are viable and profitable, and that they won’t go to zero. So at some point the downtrend will stop, and though today might or might not be that day, it’s definitely coming. Downside risk, in other words, is now smaller than upside potential.
2) Share buyers are watching the mess in Europe and concluding that austerity is being replaced with monetary and fiscal ease. The European Central Bank will have no choice but to buy up trillions of euros of peripheral country debt to keep the eurozone together — or the currency union will fall apart and former members will go back to their old currencies and devalue aggressively. Either outcome is inflationary and therefore great for precious metals.
3) Gold miners are outperforming silver miners, which means investors are going for pure monetary protection rather than the growth/inflation play that silver represents. They’re betting on chaos, which is pretty reasonable at the moment.