A Tipping Point for Gold Companies

Did you know that gold stocks tend to under-perform during election years? As shown in the chart below, over the past quarter-century up until the prior election, the performance of the Philadelphia Stock Exchange Gold and Silver Index (XAU) was weak during the year of a presidential election.


The silver lining for gold stock investors is that the XAU has historically bounced back the year after the election.


I often say that life is all about managing expectations. The difficult part of investing in gold and gold companies is experiencing the typical price swings, so it’s important to understand the inherent monthly and annual volatility.

Along with the normal volatility, gold equity investors have had to deal with plenty of challenges in recent years, as many executives overpromised and underdelivered, diluting their production per share and their reserves per share. In addition, margin costs have been rising. The result is unhappy shareholders, with bullion outperforming gold miners.

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