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That's a good question. People want the real metal instead of the stocks is one issue, and there were some reports of hedge funds shorting miners and holding long the metal. Personally, I've started adding to metals funds (not a whole lot, but even if gold falls a little more, miners are still priced as if gold was cheaper. Gold miner funds have dropped huge lately. GLDX is at a 52 week low.
I was talking about this the other day - across the board, a lot of commodity stock related funds didn't do well last year, despite prices remaining pretty high. Gold aside, if the world is doing so well, I'd think they would need energy, materials, etc. Some of these things have done a bit better this year, such as the ags, but the precious metals miners keep rolling over.
It's also sort of the Jim Rogers philosophy, holding the actual commodity instead of companies, as there's no way to guarantee specific companies will track even close to the actual. The miners situation is a pretty extreme example of that, though, and it's across the entire sector.
TGLDX is down a couple of % for the year, but that's good compared to the category (and really, I wouldn't pick another mutual fund in the category.)
Hi Dak - Agree with what Scott said. Miners and metal often diverge, but should correlate more closely long term. 2011 was brutal for miners. Some "gold" & PM funds (typically invested in mining shares) lost 25-35% while metal hardly moved. Miners react more to economic & geopolitical forces like political stability of the producing nation, labor problems, environmental issues, cost of fuel & equipment for operations and even safety in some violence plagued regions. Something called "gold-XAU ratio" measures this difference. Rono understands all this much better. Hussman occasionally mentions it as HSTRX holds a tad. Am linking a 2011 article that comments on this ratio. (Doesn't look very interesting. But depending how much you desire to persue this, may enlighten.)
Reply to @hank: Hank makes an excellent point that I didn't mention - political instability, natural forces (weather), management and other issues play a role in why some companies may not track the underlying commodities at all. However, in the case of the gold companies, it's really an across-the-board thing, where the miners just keep doing terribly. I've bought and will add a little more. A lot of natural resource funds had a bad 2011.
"Why large cap gold miners are being so undervalued by equity investors is an open question that takes us back to the realms of stories. That the discount exists is undeniable; all that is required to crystallise that value, we believe, is patience."
Another observation (2001) of the monetary system (hat-tip to Eric Everard):
"What we see at present is a battle between the central banks and the collapse of the financial system fought on two fronts. On one front, the central banks preside over the creation of additional liquidity for the financial system in order to hold back the tide of debt defaults that would otherwise occur. On the other, they incite investment banks and other willing parties to bet against a rise in the prices of gold,oil, base metals, soft commodities or anything else that might be deemed an indicator of inherent value. Their objective is to deprive the independent observer of any reliable benchmark against which to measure the eroding value, not only of the US dollar, but of all fiat currencies. Equally, they seek to deny the investor the opportunity to hedge against the fragility of the financial system by switching into a freely traded market for non-financial assets."
Comments
I was talking about this the other day - across the board, a lot of commodity stock related funds didn't do well last year, despite prices remaining pretty high. Gold aside, if the world is doing so well, I'd think they would need energy, materials, etc. Some of these things have done a bit better this year, such as the ags, but the precious metals miners keep rolling over.
It's also sort of the Jim Rogers philosophy, holding the actual commodity instead of companies, as there's no way to guarantee specific companies will track even close to the actual. The miners situation is a pretty extreme example of that, though, and it's across the entire sector.
TGLDX is down a couple of % for the year, but that's good compared to the category (and really, I wouldn't pick another mutual fund in the category.)
http://seekingalpha.com/article/275626-are-gold-miners-set-to-explode
"Why large cap gold miners are being so undervalued by equity investors is an open question that takes us back to the realms of stories. That the discount exists is undeniable; all that is required to crystallise that value, we believe, is patience."
Another observation (2001) of the monetary system (hat-tip to Eric Everard):
"What we see at present is a battle between the central banks and the collapse of the financial system fought on two fronts. On one front, the central banks preside over the creation of additional liquidity for the financial system in order to hold back the tide of debt defaults that would otherwise occur. On the other, they incite investment banks and other willing parties to bet against a rise in the prices of gold,oil, base metals, soft commodities or anything else that might be deemed an indicator of inherent value. Their objective is to deprive the independent observer of any reliable benchmark against which to measure the eroding value, not only of the US dollar, but of all fiat currencies. Equally, they seek to deny the investor the opportunity to hedge against the fragility of the financial system by switching into a freely traded market for non-financial assets."
Source Article:
http://dailycapitalist.com/2012/03/26/telling-tales-about-money/