Guldaktier vs guld


Consider the chart below that shows that relative to the underlying commodity – gold – gold stocks are, on average, about as cheap as they get. They are as cheap as they were at the beginning of this cycle (an opportunity only a few visionaries like Doug were willing to take), and even as cheap as they were during the crash of 2008 (an opportunity few were brave – or liquid – enough to take).

Och från

Whatever the reason, the underperformance of the mining shares in the last 18 months has been significant. At this point, because of the price divergence, the valuation disparity, and general capitulating sentiment, there doesn’t seem to be a case for selling mining shares. Given the valuations, we are evaluating whether it is appropriate to add to the position. The negative sentiment towards gold could continue for a time, but as economist Herbert Stein cautions, “If something cannot go on forever, it will stop.” When price divergences like this occur, they usually self-correct. In the interim, there is a strong case that gold mining stocks are cheap and that much bad news is priced in.”



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