TOP 10 Q & A's

Q7. Your newsletter seems to be heavily oriented toward gold mining stocks and to a lesser extent silver mining stock investments. What advantage, if any, is there in owning the mining shares as opposed to owning gold and silver bullion?

 

Gold mining and silver mining profits are leveraged to the price of the metals. If the price of gold suddenly rises 10%, it may mean a 20% or 30% rise in the profits of the gold mining companies. So during a secular bull market like we are in now, when you expect the price of the metals to rise on a regular basis, over time we expect these companies to rise in value more than the price of the metal. The leveraged aspect of gold and silver mining has been born out from past bull markets in the metals including that of the 1930s and 1970s and so far in the current gold bull market that began in 2002. Interestingly, during the 1930s, when at one point the Dow lost nearly 90% of its value, had you allocated 15% of your portfolio to Homestake and 85% to the Dow, you could have avoided losing money during most of the 1930s. Huge gold mining profits drove Homestake’s price up nearly 7 times at one point as profits and share prices were plunging in most other industries.

 

 

Of course it is important to keep in mind that mining is a very risky business. Many things can and do go wrong with any given mining project that can cause the value of these stocks to decline even during bull markets. So, gold and silver mining investments bring with them much higher levels of risk. But they also bring with them much higher profit expectations. As a former lender and investment banker, I have experience in analyzing the economic viability of mining projects, and I bring these insights into my newsletter. Go to www.Miningstocks.com to learn more and to subscribe.

 

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