Chart usGOLD   Chart usSILVER  
 
Food for thought
When words lose their meaning, people lose their liberty
Confucius  
Search for :
LATEST NEWS  :
MINING STOCKS  :
Subscribe
Write Us
Add to Google
Search on Ebay :
PRECIOUS METALS (US $)
Gold 1292.73-11.65
Silver 20.35-0.52
Platinum 1466.80-10.95
Palladium 867.95-0.88
WORLD MARKETS
DOWJONES 17090-2
NASDAQ 44762
NIKKEI 15284-44
ASX 557710
CAC 40 441134
DAX 979441
HUI 235-4
XAU 99-2
CURRENCIES (€)
AUS $ 1.4291
CAN $ 1.4468
US $ 1.3464
GBP (£) 0.7926
Sw Fr 1.2150
YEN 137.0340
CURRENCIES ($)
AUS $ 1.0615
CAN $ 1.0744
Euro 0.7427
GBP (£) 0.5887
Sw Fr 0.9022
YEN 101.7730
RATIOS & INDEXES
Gold / Silver63.52
Gold / Oil12.39
Dowjones / Gold13.22
COMMODITIES
Copper 3.260.06
WTI Oil 104.30-0.12
Nat. Gas 3.840.08
Market Indices
Metal Prices
RSS
Precious Metals
Graph Generator
Statistics by Country
Statistics by Metals
Advertise on 24hGold
Projects on Google Earth
Gold or mining shares?
Published : December 18th, 2012
404 words - Reading time : 1 - 1 minutes
( 3 votes, 1/5 ) Print article
 
    Comments    
Tweet

 

 

 

 

There are many reasons to own physical gold. They arise from the financial and monetary uncertainty impacting investors around the globe. Some of the more obvious reasons are:

 

*       Weakening economic activity and rising inflationary pressures bring back unpleasant memories of the stagflation experienced in the 1970s

*       Geopolitical tensions remain a major area of focus

*       The ongoing sovereign debt crisis and the knock-on effect it is having on the solvency of some of the world’s largest banks because they own too much government paper

*        

By owning physical gold you are protected from the above because physical metal does not have counterparty risk. But do you also want to own the shares of gold mining companies? There are two things that need to be considered to answer this question.

 

The first is will the mining shares do well if gold appreciates? The answer is maybe. Normally the shares of gold mining companies appreciate at least as much as the price of gold, and sometimes do even better. But it does not always work out that way.

 

For example, from 2001-to-2011 gold has appreciated 14.5% per annum over these 11 years in terms of euros, and 17.7% per annum when gold’s price appreciation is measured in terms of US dollars. Over this same period, the Philadelphia Stock Exchange Gold and Silver Index, which in North America is a widely followed measure of gold mining companies, appreciated 3.2% per annum. Even when taking dividends into account, the mining shares over this period of time did not appreciate as much as the gold price.

 

Over the last 11 years, the shares of gold mining companies have on the whole done all right, and have in fact fared better than the general stock market. Clearly though, the shares have underperformed gold. The reason is that the shares of gold mining companies respond to circumstances differently than the price of gold, which leads to the second and more important point that needs to be considered.

 

The shares of gold mining companies are not a safe haven like physical gold. Gold does not have a balance sheet, management team, price/earnings ratio or any of the other things that characterise the shares of mining companies. This observation makes it clear that gold and mining shares are fundamentally different, meaning that the mining shares may not be suitable for everyone. Their risks need to be carefully studied, as is the case with any investment.

 

 

Tweet
Rate :Average note :1 (3 votes)View Top rated
Previous article by
James Turk
All articles by
James Turk
Next article by
James Turk
Receive by mail the latest articles by this author  
Latest comment posted for this article
Be the first to comment
Add your comment
TOP ARTICLES
Editor's picks
RSS feed24hGold Mobile
Gold Data CenterGold & Silver Converter
Gold coins on eBaySilver coins on eBay
Technical AnalysisFundamental Analysis

James Turk

James Turk is the founder of the Free Gold Money Report and of GoldMoney.com. He is also the co-author of The Coming Collapse of the Dollar (www.dollarcollapse.com).
James Turk ArchiveWebsiteSubscribe to his services
Most recent articles by James Turk
7/22/2014
7/17/2014
7/15/2014
7/14/2014
7/8/2014
All Articles
Comment this article
You must be logged in to comment an article8000 characters max.
 
Sign in
User : Password : Login
Sign In Forgot password?
 
Receive 24hGold's Daily Market Briefing in your inbox. Go here to subscribe or unsubscribe.
Disclaimer