Our Q&As are emailed in our Saturday Morning Report, find the answer to this question below.
Gentlemen, why do you think there's such a huge gap between the values of gold miners and physical gold? Are the miners going to play catch-up or will they always trail? I own both PMGOLD (which has performed very well) and a number of gold miners/explorers like PDI, SBM, PRU, VAU etc, in part due to potential M&A. Where would you put (or keep) your money?
Hi David,
There are a lot more variables when it comes to the miners relative to the physical. Operational performance is a big one while the degree of hedging carried by the respective companies is also important. i.e. they forward sell gold at lower prices to get certainty which provides a hand break in a strong market.
In general, we don’t expect the gold miners to play significant catch up to physical gold unless they enjoy the future attention of a suitor. However, when the precious metal does experience another 10-15% pullback the quality, and especially more highly hedged players, will hold up better.
At this stage while we remain bullish toward gold medium-term, but we do believe a decent pullback is looming on the horizon hence from a buying perspective we would be patiently waiting to buy dips – they do happen, look at the banks this week!
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