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"a decline means one of three things: interest in bullion declines significantly, value-minded investors aggressively scoop up producer shares or some combination scenario."
Why would you not want to be a value minded investors aggressively scoop up producer shares? Why not educate yourself to this space and prepare yourself to pick up miners cheap. The first step is to take these articles with a grain of gold dust.
The value of a commodity (gold, oil, milk, pork bellies, etc.) is impacted by the valuation of the currency it's held in.
From the link below (investopedia):
"Gold is a proactive investment to hedge against potential threats to paper currency. Once the threat materializes, the advantage gold can offer may have already disappeared. Therefore, gold is forward-looking, and those who trade it must be forward-looking as well."
I'm not a technical expert by any stretch of the imagination but the pattern on the chart looks to me like a flag pattern consolidation that normally resolves itself with a continuation of the trend. If that turned out to be true, it doesn't say that gold miners should go down, it just says that bullion should go up more than gold miners OR go down less.
Since the second half of 2011 gold has been going down, after a huge rally from roughly $700 in late 2008 to roughly $1900 in late 2011. Interesting, the "box", the 50-62% retracement of that move is bounded on the lower side by roughly $1150. Gold has tested $1150 several times in the last six months and it has held. So from very long term perspective one might argue bullishly for gold.
Along with gold being weak since late 2011 the miners have been weaker, which has caused the ratio of GLD to GDX to climb as shown in the chart in the article. If the price of gold was set to rise, then a good bull market should be led by the miners as well, just like they led to the downside.
So one the one hand there seems to be good technical reasons to think that gold's next move could be higher and on the other hand the ratio of GLD to GDX would suggest to me that if the ratio is going higher and miners lead then for the ratio to go up both have to fall, miners more than bullion.
Again, that doesn't lead me to a strong belief one way or the other but I also don't think it would lead me to assume that gold miners are a bad bet.
"a decline means one of three things: interest in bullion declines significantly, value-minded investors aggressively scoop up producer shares or some combination scenario."
Why would you not want to be a value minded investors aggressively scoop up producer shares? Why not educate yourself to this space and prepare yourself to pick up miners cheap. The first step is to take these articles with a grain of gold dust.
I think the problem is that many miners are simply terrible or there are so many problems (weather, dealing with unfriendly nations, etc etc etc.) Ultimately I would not own an index gold miner ETF if I wanted to own them and would instead go with someone whose opinion I had a degree of confidence in actually picking the best of the bunch, like the Toqueville Gold Fund. If you just wanted a trade, you could maybe go with an ETF but anything even moderately longer-term I'd want active management.
But, if you want this sort of thing, look at CEF. I mean, combo of gold/silver that still trades with about a 7% discount off NAV....
Comments
"a decline means one of three things: interest in bullion declines significantly, value-minded investors aggressively scoop up producer shares or some combination scenario."
Why would you not want to be a value minded investors aggressively scoop up producer shares? Why not educate yourself to this space and prepare yourself to pick up miners cheap. The first step is to take these articles with a grain of gold dust.
From the link below (investopedia):
"Gold is a proactive investment to hedge against potential threats to paper currency. Once the threat materializes, the advantage gold can offer may have already disappeared. Therefore, gold is forward-looking, and those who trade it must be forward-looking as well."
gold-the-other-currency
Since the second half of 2011 gold has been going down, after a huge rally from roughly $700 in late 2008 to roughly $1900 in late 2011. Interesting, the "box", the 50-62% retracement of that move is bounded on the lower side by roughly $1150. Gold has tested $1150 several times in the last six months and it has held. So from very long term perspective one might argue bullishly for gold.
Along with gold being weak since late 2011 the miners have been weaker, which has caused the ratio of GLD to GDX to climb as shown in the chart in the article. If the price of gold was set to rise, then a good bull market should be led by the miners as well, just like they led to the downside.
So one the one hand there seems to be good technical reasons to think that gold's next move could be higher and on the other hand the ratio of GLD to GDX would suggest to me that if the ratio is going higher and miners lead then for the ratio to go up both have to fall, miners more than bullion.
Again, that doesn't lead me to a strong belief one way or the other but I also don't think it would lead me to assume that gold miners are a bad bet.
But, if you want this sort of thing, look at CEF. I mean, combo of gold/silver that still trades with about a 7% discount off NAV....