This is something that you should decide, each investment is a very personal decision.
Think over:
- What are your long term goals? Are you after long term growth, or looking to take advantage of a specific event?
When you have defined the above, you must establish how explorers, small scale producers, medium and large scale producers have responded to similar events in the past.
It is important to understand that in Australia, there are pure-play gold miners such as NST, SAR, PRU, RSG and then there are multi-metals miners such as BHP and that these will respond differently to different situations in the short and the long term.
During the previous financial crisis of 2008, gold miners fell with the market, small scale explorers and unprofitable miners being hit the hardest. When sharp shots hit the market, margin calls and liquidity risks mean that even investments that make sense to conditions are sometimes liquidated.
The size of the miner, the method of capital growth of the miner, and the intended term of return realisation for you as the investor are what matters when reflected on current and perceived market environments.
Hot money is going into the market, into companies which have failed to realise profits (many without clear paths to profitability), retail investors are piling in funded by government funded liquidity all the while those who have been in the markets for decades as well as major investment (not retail) institutions are scratching their heads failing to understand why market movements continue to diverge from market fundimentals.
Now is the time to plan for what happens - when do Australian Jobkeeper subsidies end? Are you comfortable with a potential 15-25% loss even on a gold stock over a 3-4 month period until the market can reallocate capital into producers like NST and SAR, and then onto explorers like RED?
Smallest explorers and producers do hold the greatest risk of going under if the market as a whole falls, will be the last to get an increase on the buy side orders but will also go up the most if FOMO kicks in as it did in 2009.
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