LIVE Gold Prices $  | E-Mail Subscriptions | Update GoldSeek | GoldSeek Radio 

Commentary : Gold Review : Markets : News Wire : Quotes : Silver : Stocks - Main Page 

 GoldSeek.com >> News >> Story  Disclaimer 
 
Latest Headlines

GoldSeek.com to Launch New Website
By: GoldSeek.com

Is Gold Price Action Warning Of Imminent Monetary Collapse Part 2?
By: Hubert Moolman

Gold and Silver Are Just Getting Started
By: Frank Holmes, US Funds

Silver Makes High Wave Candle at Target – Here’s What to Expect…
By: Clive Maund

Gold Blows Through Upside Resistance - The Chase Is On
By: Avi Gilburt

U.S. Mint To Reduce Gold & Silver Eagle Production Over The Next 12-18 Months
By: Steve St. Angelo, SRSrocco Report

Gold's sharp rise throws Financial Times into an erroneous sulk
By: Chris Powell, GATA

Precious Metals Update Video: Gold's unusual strength
By: Ira Epstein

Asian Metals Market Update: July-29-2020
By: Chintan Karnani, Insignia Consultants

Gold's rise is a 'mystery' because journalism always fails to pursue it
By: Chris Powell, GATA

 
Search

GoldSeek Web

 
Gold Stocks: Stick with Juniors and Avoid Large Caps



-- Posted Tuesday, 18 January 2011 | | Source: GoldSeek.com

By Jordan Roy-Byrne, CMT

 

In covering the gold sector for my premium subscribers, I have noticed something lately. The large-caps really suck! Ok, that is harsh but it is the truth.

 

In the chart below I show large-cap indices. What do you see?

 

 

The Dow Jones Precious Metals Index hasn’t gone anywhere for five years, while Gold has more than doubled. The next two (the XAU and GDX) are trading right at their 2008 peaks. Since then, I quickly calculate that Gold and Silver are higher by about 33%.

 

We all know that GDXJ outperformed GDX in 2010. It wasn’t close and even during this correction GDXJ is holding up better.

 

Yet, GDXJ is weighted heavily in some companies that are above $1 Billion in market cap. Where is the “junior” in that? I created my own index of 25 gold stocks, which are equally weighted and range mostly from $200-$700 million in market cap.

 

My junior index against the HUI (GDX follows the HUI) is moving higher after an 8-year breakout. This chart tells us that the juniors should outperform strongly in 2011 and likely 2012.

 

 

We’ve written about this before but it bears hearing again.

 

Too often we hear about how gold stocks are cheap and how they are priced for $1000 Gold or $800 Gold. Just because the HUI/Gold or XAU/Gold ratio is low doesn’t mean the sector is at a bottom. The reality is that large gold stocks have consistently underperformed Gold over time. Take a look at this piece from Steve Saville and his chart which goes back to 1960.

 

Steve attributes the poor performance to rising costs, management errors, environmental and political factors but most importantly, depletion. Just to stay in business gold companies have to consistently find new deposits, mine those deposits and add to reserves. The larger a company is, the more difficult it is to do these things. A junior company can grow by building a few small mines. A large-cap needs to find huge deposits that can become huge mines. It is simply a more difficult business for the larger sized companies.

 

It is critical that investors and speculators take note of all these factors before partaking in the sector. I fear that the new entrants in the sector will think they are safe by buying Newmont or Barrick. They may be less volatile, but history argues you are better off holding Gold or Silver.

 

Sure the juniors have already had a fantastic run, but our chart argues that it may be even better in the next few years. As the bull market rages on, the herd will naturally become more speculative. The large players have begun to resort to takeovers and acquisitions. This will continue and further catalyze the junior sector.

 

If you want to be involved in the bull market then you have to have a presence in the junior market. Our service offers professional guidance and focus on uncovering the best opportunities in the juniors. We are soon starting a separate portfolio just for trading the GDXJ ETF. We invite you to consider a free 14-day trial.

 

Good Luck!

 

Jordan Roy-Byrne, CMT

Jordan@TheDailyGold.com

Gold & Silver Premium


-- Posted Tuesday, 18 January 2011 | Digg This Article | Source: GoldSeek.com




 



Increase Text SizeDecrease Text SizeE-mail Link of Current PagePrinter Friendly PageReturn to GoldSeek.com

 news.goldseek.com >> Story

E-mail Page  | Print  | Disclaimer 


© 1995 - 2019



GoldSeek.com Supports Kiva.org

© GoldSeek.com, Gold Seek LLC

The content on this site is protected by U.S. and international copyright laws and is the property of GoldSeek.com and/or the providers of the content under license. By "content" we mean any information, mode of expression, or other materials and services found on GoldSeek.com. This includes editorials, news, our writings, graphics, and any and all other features found on the site. Please contact us for any further information.

Live GoldSeek Visitor Map | Disclaimer


Map

The views contained here may not represent the views of GoldSeek.com, Gold Seek LLC, its affiliates or advertisers. GoldSeek.com, Gold Seek LLC makes no representation, warranty or guarantee as to the accuracy or completeness of the information (including news, editorials, prices, statistics, analyses and the like) provided through its service. Any copying, reproduction and/or redistribution of any of the documents, data, content or materials contained on or within this website, without the express written consent of GoldSeek.com, Gold Seek LLC, is strictly prohibited. In no event shall GoldSeek.com, Gold Seek LLC or its affiliates be liable to any person for any decision made or action taken in reliance upon the information provided herein.