Gold miner stocks, which have lagged far behind physical gold over the past four years, may now represent the better investment, according to Wall Street Journal columnist Brett Arends.
While spot gold has gained 9 percent so far this year, Market Vectors Gold Miners exchange-traded fund has dropped 11 percent, excluding dividends.
The balance between physical gold and gold mining stocks has gone so far out of whack that an ounce of gold would now buy more shares of gold miners than at any time in the last 25 years.
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Miners’ market caps now lag the value of their gold reserves by as much as 40 percent, George Topping, a gold-mining analyst at Stifel Nicolaus, tells The Journal.
The biggest problem for the miners is that they’ve spent far too much on new production projects. But now there is evidence that companies have realized the errors of their ways, as they are cutting back on various projects.
So now might be the time to jump into gold miners, Arends says.
But others remain skeptical. "You have to accept that they are cheap and may stay cheap,” Robert Cohen, manager of the Dynamic Gold and Precious Metals fund, tells USA Today. “The question is what is the catalyst that brings them back."
John Hathaway, co-manager of Tocqueville Gold fund, says people are better off investing in physical gold. “[Y]ou don't have to worry about missed earnings or disappointing production results.”
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