Weekend Commentary for February 19th

THE FRUSTRATION WITH GOLD STOCKS
HOW DID WE GET INTO THIS MESS? – SUB-PRIME AND BEYOND
THE KOSOVO QUESTION – AGAIN
ECONOMIC INDICATORS

THE FRUSTRATION WITH GOLD STOCKS

Since the most recent rally got underway from the August lows, gold is up 39 per cent, silver is up about 49 per cent and the Gold Bugs Index (HUI) is up 42 per cent. Sounds good, but in reality the huge leverage that is supposed to come with owning gold stocks just has not kicked in at all. Some HUI components such as Harmony Gold (HMY-NY) have barely budged. But the real frustration lies with the junior producers not included in the HUI and the junior exploration plays, which in many instances have actually fallen even as gold and silver prices have shot up.

There is a malaise in the entire market. Many of the juniors – seen as high risk at the best of times – seem to have attracted a much higher than normal risk premium. Until that perception changes these stocks will remain depressed, although in many instances it is difficult to fathom how much further they [ read more... ]