Mining’s old guard needs strong medicine
A new report details subpar investor returns in the mining industry over the last decade, particularly big cap diversified companies which have not adapted to new realities.
Gold and silver, and the stocks that are leveraged to them, have a long, long way to go. It’s not too late to get in on the action. In fact, I have 4 good reasons why the next leg up in gold may still be in its early stages.
In further edited excerpts from the original article* Sean Brodrick (www.uncommonwisdomdaily.com) goes on to say:
What will gold do over the next four years … or 10 years? I think it’s going higher -and silver too – in fact, I think silver will outperform gold.
Here are my four brightest reasons why metals should shine:
Reason #1 — Investor Demand Is Strengthening
As any investor knows, the more there is of something, the lower it is valued. That is the problem with all paper currencies now. Central banks have cranked up the printing presses (electronically, anyway) in a desperate bid to prop up financial institutions that are being crushed by the weight of their own bad decisions.
What kind of money can’t be printed? Gold and silver! Precious metals are money — you can use them to buy stuff, and they are the ultimate currency when other currencies are being devalued. As central banks print more, the private demand for gold as an investment and inflation hedge is growing.
There’s no money bigger than the central banks of the world, and the central banks have turned into net buyers of gold. For a decade, they were net sellers. In addition, the new Third Central Bank Gold Agreement between a group of 19 European central banks provides for a limit in gold sales to 400 tonnes a year, down from 500 tonnes a year in the second agreement, which expired in late September of 2009. Sales in the second agreement really dropped off toward the end, coming in at 25 percent below the total quota as central banks turned from sellers to buyers.
The point is, if central banks — the big money — are buying, why the heck would you want to be selling? Why wouldn’t you want to buy also?
Reason #3 — A Big Gap Is Developing in Production
The financial crisis in 2008 really crunched exploration budgets for miners of all types. Worldwide, exploration budgets dropped by 40 percent year over year, according to a study from Canada’s Metals Economics Group, with junior mining companies cutting their exploration budgets the most, although most intermediate and major players have also made deep reductions of their own. This is going to worsen a supply/demand balance that is already squeezing gold prices higher.
Reason #4 — Gold Is Still Cheap!
Gold has enjoyed a great run — up more than 300 percent from its low in 2001 and 100 percent since January 2006. Metals consultancy GFMS put the inflation-adjusted high for gold at $2,079 an ounce. Could it go higher? Bet on it!
I think gold and silver, and the stocks that are leveraged to them, have a long, long way to go. It’s not too late to get in on the action. In fact, the next leg up in gold may still be in its early stages.
*http://www.uncommonwisdomdaily.com/the-4-best-reasons-to-buy-silver-and-gold-now-5-6992 (Uncommon Wisdom is a free daily investment newsletter from Weiss Research analysts offering the latest investing news and financial insights for the stock market, precious metals, natural resources, Asian and South American markets.)
Editor’s Note:
– The above article consists of reformatted edited excerpts from the original for the sake of brevity, clarity and to ensure a fast and easy read. The author’s views and conclusions are unaltered.
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