Best of the Week
Most Popular
1. US Housing Market Real Estate Crash The Next Shoe To Drop – Part II - Chris_Vermeulen
2.The Coronavirus Greatest Economic Depression in History? - Nadeem_Walayat
3.US Real Estate Housing Market Crash Is The Next Shoe To Drop - Chris_Vermeulen
4.Coronavirus Stock Market Trend Implications and AI Mega-trend Stocks Buying Levels - Nadeem_Walayat
5. Are Coronavirus Death Statistics Exaggerated? Worse than Seasonal Flu or Not?- Nadeem_Walayat
6.Coronavirus Stock Market Trend Implications, Global Recession and AI Stocks Buying Levels - Nadeem_Walayat
7.US Fourth Turning Accelerating Towards Debt Climax - James_Quinn
8.Dow Stock Market Trend Analysis and Forecast - Nadeem_Walayat
9.Britain's FAKE Coronavirus Death Statistics Exposed - Nadeem_Walayat
10.Commodity Markets Crash Catastrophe Charts - Rambus_Chartology
Last 7 days
The Corona Riots Begin, US Covid-19 Catastrophe Trend Analysis - 3rd Jun 20 -
Stock Market Short-term Top? - 3rd Jun 20
Deflation: Why the "Japanification" of the U.S. Looms Large - 3rd Jun 20
US Stock Market Sets Up Technical Patterns – Pay Attention - 3rd Jun 20
UK Corona Catastrophe Trend Analysis - 2nd Jun 20
US Real Estate Stats Show Big Wave Of Refinancing Is Coming - 2nd Jun 20
Let’s Make Sure This Crisis Doesn’t Go to Waste - 2nd Jun 20
Silver and Gold: Balancing More Than 100 Years Of Debt Abuse - 2nd Jun 20
The importance of effective website design in a business marketing strategy - 2nd Jun 20
AI Mega-trend Tech Stocks Buying Levels Q2 2020 - 1st Jun 20
M2 Velocity Collapses – Could A Bottom In Capital Velocity Be Setting Up? - 1st Jun 20
The Inflation–Deflation Conundrum - 1st Jun 20
AMD 3900XT, 3800XT, 3600XT Refresh Means Zen 3 4000 AMD CPU's Delayed for 5nm Until 2021? - 1st Jun 20
Why Multi-Asset Brokers Like TRADE.com are the Future of Trading - 1st Jun 20
Will Fed‘s Cap On Interest Rates Trigger Gold’s Rally? - 30th May
Is Stock Market Setting Up for a Blow-Off Top? - 29th May 20
Strong Signs In The Mobile Gaming Market - 29th May 20
Last Clap for NHS and Carers, Sheffield UK - 29th May 20
The AI Mega-trend Stocks Investing - When to Sell? - 28th May 20
Trump vs. Biden: What’s at Stake for Precious Metals Investors? - 28th May 20
Stocks: What to Make of the Day-Trading Frenzy - 28th May 20
Why You’ll Never Get Another Stimulus Check - 28th May 20
Implications for Gold – 2007-9 Great Recession vs. 2020 Coronavirus Crisis - 28th May 20
Ray Dalio Suggests USA Is Entering A Period Of Economic Decline And New World Order - 28th May 20
Europe’s Coronavirus Pandemic Dilemma - 28th May 20
I Can't Pay My Payday Loans What Will Happen - 28th May 20
Predictive Modeling Suggests US Stock Markets 12% Over Valued - 27th May 20
Why Stocks Bear Market Rallies Are So Tricky - 27th May 20
Precious Metals Hit Resistance - 27th May 20
Crude Oil Cuts Get Another Saudi Boost as Oil Demand Begins to Show Signs of Life - 27th May 20
Where the Markets are heading after COVID-19? - 27th May 20
Silver Springboards Higher – What’s Next? - 26th May 20
Stock Market Key Resistance Breakout Is Where the Rubber Meets the Road - 26th May 20
5 Ways To Amp Up Your CFD Trading Today - 26th May 20
The Anatomy of a Gold Stock Bull Market - 26th May 20
Stock Market Critical Price Level Could Soon Prompt A Big Move - 25th May 20
Will Powell Decouple Gold from the Stock Market? - 25th May 20
How Muslims Celebrated EID in Lockdown Britain 2020 - UK - 25th May 20
Stock Market Topping Behavior - 24th May 20
Fed Action Accelerates Boom-Bust Cycle; Not A Virus Crisis - 23rd May 20
Gold Silver Miners and Stocks (after a quick drop) Ready to Explode - 23rd May 20
3 Ways to Prepare Financially for Retirement - 23rd May 20
4 Essential Car Trade-In Tips To Get The Best Value - 23rd May 20
Budgie Heaven at Bird Land - 23rd May 20

Market Oracle FREE Newsletter

Coronavirus-stocks-bear-market-2020-analysis

Gold Bullion Performance Against Gold Stocks

Commodities / Gold and Silver 2010 Jun 05, 2010 - 01:46 AM GMT

By: Adrian_Ash

Commodities

Best Financial Markets Analysis ArticleGold for Defense. Gold Stocks for...?
Gold stocks stopped beating gold in 2005. They've lagged it since 2007...
 
IF GOLD'S GOING UP, then gold-miner stocks will rise further and faster. Right?


"Gold mining stocks [are] a more risky but more profitable way to invest in gold," says Alix Steel at TheStreet.com in New York.

"Gold bullion is defense. On the offensive side," agrees Charles Oliver of Sprott Asset Management in Toronto, "if you want capital gains, [you want] gold stocks.

"We're in a bull market in gold and, generally speaking, most of the time gold stocks will outperform bullion."

Thing is, that period of time – "most", as Oliver says – sits oddly inside the last 10 years of rising gold prices. TV football pundits would call it a game of two halves (football being a game of foot and ball, of course, rather than helmets, armor and cheerleaders).

Because over the first half of the bull market to date, gold stocks far outperformed the metal. Over the second half, in contrast, gold has matched and then beaten both the leading gold-equity funds and stocks, on average – and with significantly lower volatility, too.

XAU              Philadelphia Gold & Silver stock index
HUI               Amex Gold Bugs stock index
USERX          U.S. Global Investors Gold and Precious Metals Fund
USAGX         USAA Precious Metals and Minerals Fund
TGLDX         Tocqueville Gold Fund
INIVX            Van Eck International Investors Gold Fund
MRCGLDA LN Equity        Blackrock Gold & General (£)

Take from this what you will, but between 2000 and 2005, gold priced in Dollars rose 55%. The HUI index of 16 leading US-listed mining stocks added 195% (excluding dividends). Tocqueville Asset Management's Gold Fund rose 190% by value.

From 2005 to end-May 2010, however, gold rose 183%, while the Tocqueville fund rose 177% and the HUI index of producer stocks rose 116%.

Sure, there were better-performing gold stocks (Randgold's Nasdaq listing, GOLD, has more than quintupled in price since Jan.'05). There were better-performing funds over the last five years too, including the USAA Precious Metals and Minerals Fund (USAGX) and Van Eck International's Investors Gold Fund (INIVX).

But the apparent "leverage" to gold for which producers and actively-managed funds are recommended has evaporated over the second half of gold's 21st century bull run so far. More telling still, it's actually worked against gold equities and funds amid the financial crisis' greatest points of stress.

"When you buy or track the underlying metal – rather than investing in producer stocks – you don't get management risk, political risk, corporate tax, permitting risks and so on," said ETFSecurities' Scott Thompson this week.

You could say he was talking his book. (So are we here at BullionVault, naturally.) But what you do get when you buy gold – and what isn't offered by mining stocks or actively-managed mining-stock funds – is just a lump of metal, used to defend and store value, almost universally, for perhaps 7,000 years or more. That rare, shiny lump is as far as you can get from the growth-driven aims of most financial analysts and journalists today. Despite the worst recession and loss of global investment wealth since the 1930s, they'll still look for growth – and juiced-up profits – even from an unyielding lump of gold.

How much further might gold stocks and gold diverge from here? It might well depend on just how much deflation – capital destruction and "negative growth" – still lies ahead.

By Adrian Ash
BullionVault.com

Gold price chart, no delay | Free Report: 5 Myths of the Gold Market
Formerly City correspondent for The Daily Reckoning in London and a regular contributor to MoneyWeek magazine, Adrian Ash is the editor of Gold News and head of research at www.BullionVault.com , giving you direct access to investment gold, vaulted in Zurich , on $3 spreads and 0.8% dealing fees.

(c) BullionVault 2010

Please Note: This article is to inform your thinking, not lead it. Only you can decide the best place for your money, and any decision you make will put your money at risk. Information or data included here may have already been overtaken by events – and must be verified elsewhere – should you choose to act on it.


© 2005-2019 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

6 Critical Money Making Rules