Gold Miners vs Gold Bullion

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BHOWE
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Gold Miners vs Gold Bullion
It seems to happen a few times a year, where the gold miners get beaten down in value yet the bullion itself remains fairly strong. We have seen this again in the last month. Gold is near an all time high yet, the mining stocks have been punished loosing 20% of their value. I have both miners and bullion ETFs. I was looking for opinions on the following. I fully expect the broad stock market to go down in value with another crash at some point. During that time GOLD itself I expect will continue on its rise. My question is, will the gold miners continue to reflect the movements of the general markets, or will they break trend and follow the GOLD bull market? Why? Why do the miners get beaten down during market turns? Is it due to big funds selling their shares to cover other loses, etc. Comments?

Thanks
Bill

Edited by admin on 11/08/2014 - 06:20
Prem124
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I think the main reason why

I think the main reason why miners get taken down along with everything else is correlation. A lot of money invested is quite often done via funds, indices etc. so when people withdraw their investments it affects group of companies with much less selectivity for the quality of the stocks so gold miners should recover faster as a sector as fundamentals will get stronger for them. Obviously stock pickers will come in at some point to select quality stocks taken down along with anything else. The answer to your question lies within your investment timeframe. If you plan to hold long term PM stocks are probably better as they are significantly undervalued vs bullion. They might get taken down if we have a market crash but eventually they will recover to their fair value vs bullion.

JoeyJoeJoe
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Re:

There has been some discussions going on in other threads about this too.  Some additional explanations may be the hedging against miners and fleeing risky assets - political / management / production / exploration / etc. risks.  In a more bearish market, you'd expect the miners to trail the bullion while in a bull market, the miners should outperform.

BHOWE
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QE2

What are the thoughts about the coming end of QE2? Will there be a market crash? If so, should we be selling our mining stocks at this low point, to buy back at a much lower point? OR ride it out until everything corrects?

Bill

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