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Gold and
silver are down again today, but the mining stocks are up big. One day does
not a trend make, but this is still a possible indicator of several things:
- The plunge in mining shares has
finally gotten the attention of investors who understand that most of
these companies are viable and profitable, and that they won't go to
zero. So at some point the downtrend will stop, and though today might
or might not be that day, it's definitely coming. Downside risk, in
other words, is now smaller than upside potential.
- Share buyers are watching the mess
in Europe and concluding that austerity is being replaced with monetary
and fiscal ease. The European Central Bank will have no choice but to
buy up trillions of euros of peripheral country debt to keep the eurozone together -- or the currency union will fall
apart and former members will go back to their old currencies and
devalue aggressively. Either outcome is inflationary and therefore great
for precious metals.
- Gold miners are outperforming
silver miners, which means investors are going for pure monetary
protection rather than the growth/inflation play that silver represents.
They're betting on chaos, which is pretty reasonable at the moment.
 
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