Gold and Silver Stocks vs. Bullion Investing

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...At the very least, one should act the contrarian's contrarian and seriously consider a good weighting of mining stocks over ETFs and physical holdings when the next big post-correction move in precious metals begins.

A couple of weeks back, I looked at the issue of how silver stocks were performing against their main product, silver. It was not a pretty picture as it was revealed that a basket of silver stocks we track in my newsletter had underperformed silver by 27%!

I said I would have something more to say but recent events in silver have led to a critical juncture for the metal obliging me to focus on daily updates to subscribers. We are not out of the woods yet and silver could easily from here break down big time or break up big time. The jury is still out as the daily and intraday charts are monitored.

...The conclusion we arrived at was the fact that silver stocks have one foot in the stock market and one foot in silver. If they both go up, silver stocks do great. If one is going down then they suffer. All in all, it seems that bullion is the place to be.

...Firstly, I believe gold and silver will experience a fairly big correction this year. It may have already started but that is not a given yet. The big question for investors reloading at the next bottom is how to weigh their bullion v stocks allocation. Just like our current run up today, we see stocks underperforming metal. But will they outperform gold and silver on the next big rally after the initial drop? Clearly the answer depends on how the general stock market is doing. All I can say is that if the credit squeeze fears are finally put aside around the same time gold and silver form their next major bottom then mining stocks may well be the place to be. In other words, if the S&P 500 can rally to new highs in the next 12 months while the precious metals gun for their old highs then the HUI and other mining stocks will have the best of both worlds.

At the very least, one should act the contrarian's contrarian and seriously consider a good weighting of mining stocks over ETFs and physical holdings when the next big post-correction move in precious metals begins.

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