Thanks for your comments.
I've been saying gold is better risk weighted investment/bet than gold equites for a long while now. In fact I called NST a bubble in July last year at $13.99 (see my post below) and as most investors know (or should know) NST is the largest component of GDXJ.
https://hotcopper.com.au/threads/fu...712778/page-821?post_id=39669283#.XzaL2hrCahBThe price of NST toyed with my $13.99 call on Wednesday reaching a intra day low of $14.04 and today closed at $14.24, only 1.8% higher than my July 2019 bubble call. Over the same time $A gold is up from ~A$2,050/oz to A$2,700/oz, a rise of 32%!!
Given gold's out performance of the biggest component company of GDXJ and the fact that it was shown in March that the GDXJ is far more sensitive to equities collapsing (GDXJ down 58.5% from peak vs gold down 14.8%), I really can't see why the penny doesn't drop for some of you that holding gold equities or any equities for that matter is like sitting on a time bomb.
I've presented the US treasury numbers and the GDP numbers in the preceding posts. If you can't see that equities are doomed one way or another from those numbers there is not much more I can say. Gold will win the race but it might not be the race higher and if that's the case gold equities don't have the same lustre as gold.
One more closing point. When you buy an oz of gold from the mint (spot market) you are paying one for one, meaning the cost of the purchase of that oz is the price of gold on the day you buy it. When you buy an oz of gold in the ground that a gold miner tells you they may or may not mine in the future the price you pay for that oz is impossible to determine. Most people who invest in gold miners think they are getting those ozs cheaper than they would if they just bought them today from the mint but they really have nothing to base that on. What if for example the $A rises sharply in value as it becomes viewed as a safe haven currency and the price of gold in $A falls sharply and the $A gold price retreats to A$1,600/oz where it was as recently as Aug 2018? What would be the value of the millionth +1 oz of gold in the ground (or 20 millionth +1oz for that matter) that some Aussie gold producer may or may not mine in the years to come, that oz that you just bought by buying a share in their company? When you buy a share in a company you are buying a right to their future cash flow and if they don't pay dividends that value also becomes much harder to determine as we all know these gold miners don't stand still for very long. They are always doing deals and trying to convince shareholders that their cashflows are going to be great but when you actually look at their earnings history and the net cash that these miners hold now or at any stage of their history, you actually get bitterly disappointed every time. I can give you the links where I have posted the entire history of earnings per share for both NST and SAR since they started mining if you have 't seen them already. Any rational investor looking at these number would share my disappointment and considering the sizeable operational, currency and market risks involved in owning gold miners, the option of just owning physical gold looks a lot better.Esh
