Most Popular
1. It’s a New Macro, the Gold Market Knows It, But Dead Men Walking Do Not (yet)- Gary_Tanashian
2.Stock Market Presidential Election Cycle Seasonal Trend Analysis - Nadeem_Walayat
3. Bitcoin S&P Pattern - Nadeem_Walayat
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
4.U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - Raymond_Matison
5. How to Profit from the Global Warming ClImate Change Mega Death Trend - Part1 - Nadeem_Walayat
7.Bitcoin Gravy Train Trend Forecast 2024 - - Nadeem_Walayat
8.The Bond Trade and Interest Rates - Nadeem_Walayat
9.It’s Easy to Scream Stocks Bubble! - Stephen_McBride
10.Fed’s Next Intertest Rate Move might not align with popular consensus - Richard_Mills
Last 7 days
Why President Trump Has NO Real Power - Deep State Military Industrial Complex - 8th Nov 24
Social Grant Increases and Serge Belamant Amid South Africa's New Political Landscape - 8th Nov 24
Is Forex Worth It? - 8th Nov 24
Nvidia Numero Uno in Count Down to President Donald Pump Election Victory - 5th Nov 24
Trump or Harris - Who Wins US Presidential Election 2024 Forecast Prediction - 5th Nov 24
Stock Market Brief in Count Down to US Election Result 2024 - 3rd Nov 24
Gold Stocks’ Winter Rally 2024 - 3rd Nov 24
Why Countdown to U.S. Recession is Underway - 3rd Nov 24
Stock Market Trend Forecast to Jan 2025 - 2nd Nov 24
President Donald PUMP Forecast to Win US Presidential Election 2024 - 1st Nov 24
At These Levels, Buying Silver Is Like Getting It At $5 In 2003 - 28th Oct 24
Nvidia Numero Uno Selling Shovels in the AI Gold Rush - 28th Oct 24
The Future of Online Casinos - 28th Oct 24
Panic in the Air As Stock Market Correction Delivers Deep Opps in AI Tech Stocks - 27th Oct 24
Stocks, Bitcoin, Crypto's Counting Down to President Donald Pump! - 27th Oct 24
UK Budget 2024 - What to do Before 30th Oct - Pensions and ISA's - 27th Oct 24
7 Days of Crypto Opportunities Starts NOW - 27th Oct 24
The Power Law in Venture Capital: How Visionary Investors Like Yuri Milner Have Shaped the Future - 27th Oct 24
This Points To Significantly Higher Silver Prices - 27th Oct 24
US House Prices Trend Forecast 2024 to 2026 - 11th Oct 24
US Housing Market Analysis - Immigration Drives House Prices Higher - 30th Sep 24
Stock Market October Correction - 30th Sep 24
The Folly of Tariffs and Trade Wars - 30th Sep 24
Gold: 5 principles to help you stay ahead of price turns - 30th Sep 24
The Everything Rally will Spark multi year Bull Market - 30th Sep 24
US FIXED MORTGAGES LIMITING SUPPLY - 23rd Sep 24
US Housing Market Free Equity - 23rd Sep 24
US Rate Cut FOMO In Stock Market Correction Window - 22nd Sep 24
US State Demographics - 22nd Sep 24
Gold and Silver Shine as the Fed Cuts Rates: What’s Next? - 22nd Sep 24
Stock Market Sentiment Speaks:Nothing Can Topple This Market - 22nd Sep 24
US Population Growth Rate - 17th Sep 24
Are Stocks Overheating? - 17th Sep 24
Sentiment Speaks: Silver Is At A Major Turning Point - 17th Sep 24
If The Stock Market Turn Quickly, How Bad Can Things Get? - 17th Sep 24
IMMIGRATION DRIVES HOUSE PRICES HIGHER - 12th Sep 24
Global Debt Bubble - 12th Sep 24
Gold’s Outlook CPI Data - 12th Sep 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

GOLD WILL CONTINUE TO OUTPERFORM MINING SHARES

Commodities / Gold & Silver Stocks 2024 Sep 06, 2024 - 11:41 AM GMT

By: Kelsey_Williams

Commodities

No amount of wishful thinking and baseless proclamations will change that. Owning gold stocks (miners) instead of the actual physical metal (in other words, processed and refined with appropriate hallmarks and in tradable form) is a losing bet. Investors should ignore the siren song of gold mining shares.

At their highs last week, gold stocks had increased eighty percent from their lows just two years ago. If you had bought then, and held through a thirty percent drop in 2023, you would be up about seventy percent at current prices.  That compares very favorably to gold which was up fifty-five percent over the same period. Congratulations if you benefited from that.


If we go back to early 2022, however,  gold stocks peaked, then lost more than fifty percent over the next several months. Physical gold over those months was dropping, to be sure; but, gold’s decline was only half as much as gold stocks. The net effect is that gold is currently up twenty-five percent ($2000 to $2500) since March 2022, whereas gold stocks are down ten percent.

If you are an owner of gold stocks for longer than the past two years, the news only gets worse. Since August 2020, the price of gold has increased by twenty-five percent and gold stocks have declined by twenty percent.

None of this is unusual or unique. Nor, should it be surprising. After gold and gold stocks peaked in 2011, the yellow metal began a highly volatile descent with its price dropping from $1895 to $1060, a loss of 44%. Not to be outdone, gold stocks seemed to give up the ghost, losing more than eighty percent by December 2015.

From that point to the August 2020 peaks, the gold price nearly doubled from $1060 to $2060. Gold stocks bettered that with an increase of two hundred fifty percent. Wonderful! Fabulous!! Except for some overlooked details.

As we said earlier, gold stocks had previously fallen twice as much as gold had, leaving them way behind gold when the move upwards started in early 2016. Even with their temporary outperformance, gold stocks peaked in 2020 still down more than thirty percent from their peaks nine years before, in 2011. 

WHERE WE ARE NOW

Currently, thirteen years later, gold stocks are down forty-five percent from their highs in 2011. Gold, on the other hand, is up thirty-one percent. Gold stocks failure to keep pace with a rising gold price over time is shown on the following chart…

HUI to Gold Ratio 1996-2023

Except for three years between 2001-04, gold stocks have continually lost value relative to gold. The increase during that time was more a catchup for the ground lost after both gold stocks and gold peaked in 1980.Since gold and gold stocks peaked in 1980, gold has been a better place for your money. Ironically, that is true on both the upside and the downside. As I said in a previous article…

(watching the) “price performance of gold stocks is like (watching) a marathon runner who continually loses ground to the competition, but occasionally runs really fast to catch up; never quite reaching his previous place, then falling further behind (over and over).

If you currently hold gold stocks and have benefitted from the latest sign of life/dead-cat bounce in share prices, sell them. Any outperformance is temporary and won’t last. If you want to own gold, then buy gold with the sales proceeds of your gold stocks. (also see Gold Stocks vs Gold – Choose Gold and Gold Has Done Its Job – Isn’t That Enough?)

Kelsey Williams is the author of two books: INFLATION, WHAT IT IS, WHAT IT ISN’T, AND WHO’S RESPONSIBLE FOR IT and ALL HAIL THE FED!

By Kelsey Williams

http://www.kelseywilliamsgold.com

Kelsey Williams is a retired financial professional living in Southern Utah.  His website, Kelsey’s Gold Facts, contains self-authored articles written for the purpose of educating others about Gold within an historical context.

© 2024 Copyright Kelsey Williams - All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


© 2005-2022 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in