Gold and Gold Stocks Side by Side Comparison
When gold’s rubber band of out performance relative to the gold shares approaches its breaking point, it tends to mark the onset of an equity side catch up. The rising correlation between gold and gold shares from 2009 (-0.14) to 2011 (0.66) illustrates yet another, still largely unrecognized, catch up phase. Investors have also enjoyed a slow and steady increase in dividends over this period. For example, Newmont Mining boosts its dividend by 50 percent recently.
2009
2010
2011
Hello Eric,
I would like to draw your attention to a comment made by John Williams of Shadowstats.com.
"Government Seizure of Privately Held Gold. A question commonly raised by subscribers is the potential for the federal government to seize privately held gold, today, as it did back in 1933, when President Franklin Roosevelt abandoned the domestic gold standard. While there is little the federal government might do that would be too surprising in the current environment, seizure of privately-held gold most likely would be tied to some reform of the monetary system, not just as an action aimed at punishing gold investors."
"Back in 1933, the use of gold continued for the settlement of international accounts between sovereign states, and the U.S. governmentÕs needs under that circumstance were used as an excuse for the seizure of publicÕs gold holdings. While there were some exceptions to the seizure, such as coin collections and jewelry, U.S. investors ended up shifting funds into gold stocks as surrogates for the precious metal."
"Private U.S. ownership of physical gold became legal, again, after President Richard Nixon closed the gold window on international settlements in 1971. The shift in private-gold-ownership policy, then, also was tied to the international monetary systemÕs backing, or lack of same, in gold."
"Meaningful reform of the global monetary system and creation of a new U.S. currency, of whatever form, most likely would be post-hyperinflation events."
Gold stocks did perform well after gold could legally be held by American citizens in 1971. An alternative to direct gold investment was not required for gold stocks to perform well but I still find myself uncertain due to John Williams comments. I'm not sure if gold stocks will be the darlings of the market and greatly outperform the price of gold or will be drawn down with the general stock market with nominal values increasing but true gold based values declining. I find myself wishing I had taken Jim Rogers advice and invested directly into the commodity. There is blood in streets from gold stock investors but unfortunately the blood I see is my own.
Sincerely,
Clay
