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.
Are the recent declines in the price of gold and silver signs of the bursting of the bubble… or just a blip in the ongoing bullion bull run? The odds are probably on the latter. [Let me tell you why.]
So concludes Lawrence Williams (www.mineweb.com) in his article* which Lorimer Wilson, editor ofwww.munKNEE.com, has reformatted into edited […] excerpts below for the sake of clarity and brevity to ensure a fast and easy read. (Please note that this paragraph must be included in any article reposting to avoid copyright infringement.) Williams goes on to say:
Let’s start with a quote from Bill Bonner at The Daily Reckoning: “Gold is probably beginning a serious correction. If not now… soon. A serious correction will take the price down 10%… or 20%… or 50%. What should you do if gold goes down 10%? Buy it!What if gold goes down another 10%? Buy more! What if it goes down 50%? Back up the truck!”
The smart money out there knows that the fundamental flaws in the global economic system – and in the so-called remedies put out by politicians and some economists – remain with us and are likely to do so for some time. Every time the gold market has slipped back in the past year or so it has rapidly climbed back to exceed the level from which the fallback started – one step back followed by two steps forward. This surely is sufficient indication that there is a huge amount of buying strength out there for gold – and even the waverers are now beginning to return, which should give another boost to the price going forward. India, for example, has seen a return to gold purchases in a big way, despite the ever-higher gold price which had muted demand there. There is beginning to be an acceptance that perhaps a gold price of $1300 is the new floor – and the only way now is up.
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The gold market can be fickle,[however]. Only a few weeks ago gold was surging, apparently because of worries about Eurozone economies but now gold is falling despite the reality of the latest financial worries in Greece and in Ireland… while U.S. state deficits, which may prove to be even worse than those faced by the Europeans, have managed to remain low on the horizon – but will surely have an impact on the markets before too long.
The latest Eurozone travails, coupled with Chinese inflation concerns, have led to a surge in the dollar against the Euro and as gold more often than not moves counter to the dollar, this has helped hit the gold price – and the stock markets. The dollar is once again the popular safe haven of the moment – but perhaps not for long.
There is also a large element of profit taking in gold which tends to come in immediately after a major surge in price and, coupled with the seemingly strongish dollar, this has served to accelerate the gold price decline. In addition, computer stop loss trading will have added to the downward momentum in both gold and silver. We now need to wait and see whether things will stabilize at around current levels, or whether the bears will have a few more days, or even weeks, and the price of gold falls to test $1300 or lower. It certainly could although the fundamentals supporting gold and silver are still in place.
Conclusion
If there is another stock market crash ahead – and there are a number who have been predicting that for some time now – gold will likely continue to fall back too, just as it did in October 2008. [That being said,] what was the first to recover all its lost ground? It was gold. Not gold stocks which were decimated with all the others in the general meltdown, but gold itself. [So regardless of what happens:]
*http://www.mineweb.com/mineweb/view/mineweb/en/page33?oid=115265&sn=Detail&pid=92730
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.
- Permission to reprint in whole or in part is gladly granted, provided full credit is given as per paragraph 2 above.
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