thedailygold.com / By Jordan Roy-Byrne / february 9, 2013
The gold and silver stocks as a group have certainly been a disaster over the past two years. Both GDX and GDXJ are down with GDXJ leading the spiral. Yet, the metals are actually higher. Gold is up quite a bit while Silver is up marginally. Because of the volatility in this sector we can certainly choose any period to emphasize a point. However, it is becoming clear that the mining equities are struggling to outperform the metals. In studying the history of this sector (both the stocks and the metals) I’ve learned two things that I will share with you today. First, the large-cap miners have no track record of consistently outperforming Gold and second, it is possible to routinely find companies which can outperform the metals.
I credit the first point to Steve Saville, who was one of the first to note that the miners do not consistently outperform the metals. In fact, in secular bull markets the stocks consistently underperform Gold. Steve’s chart below shows how the miners underperformed badly from 1974 to 1980. Recall that the Gold price was fixed until 1971. Thus, both the uptrend from 1964-1968 and the downtrend from 1968-1971 are exaggerated.
Thanks to BrotherJohnF