Does it Matter Where the Gold Is?

Gold prices have calmed some this year -- up only a few percentage points.

But check out what’s happening with mining stocks like Goldcorp (GG), dividend-raising Barrick Gold (ABX), Newmont Mining (NEM) and Harmony Gold Mining (HMY).

Gold Price in US Dollars Chart

Gold Price in US Dollars data by YCharts

If gold’s still up but mining companies are down, doesn’t this look like a potential deal? A gold bug might see it that way -- but a more rational investor shouldn't.

Gold mining companies aren’t pure plays on gold. As they have to dig up the gold and process it, they’re affected all sorts of variables – like delays and droughts – that don’t affect gold bars. So some discount makes sense. The folks actually pulling gold out of the ground and trafficking in the metal have trailed spot prices for a while.

Gold Price in US Dollars Chart

Gold Price in US Dollars data by YCharts

But beyond that, putting money in gold, whether in bars or mines, is a speculative bet. For gold or its miners do well, there have to be more and more enthusiastic gold bugs who think economic collapse is right around the corner and that this is the best way to prepare.

For the last few years, these bugs have materialized despite the fact that gold looks like a big, fear-inflated bubble.

But Warren Buffet broke out the calculator earlier this year to prove to people how little sense it makes to horde the stuff. And maybe it’s sinking in -- as we’ve seen recently, investors looking for safety are turning more often to the U.S. government.

From the editors of YCharts.YCharts Pro Investor Service includes professional stock charts, stock ratings and portfolio strategies.



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