Is all hope lost for the gold stocks? Are investors ever going to return? As bad as things seem right now, these are questions we’ve seen many times over the course of gold’s bull. And I believe the answers are the same as they’ve been in the past
Ever since the beginning of gold’s bull market, the economic balance has come under intense scrutiny. Demand has been on the rise as more investors have embraced gold as a store of wealth. And the supply chain has done its best to meet growing demand.
The gold-mining industry has made impressive strides since its 2008 production low. In the last few years mine output has surged. And in taking a closer look into this major supply source, we find some fascinating country-level developments.
While the juniors spread themselves far and wide, there are definitely popular locales they tend to favor. And interestingly these locales don’t necessarily line up with all the major production centers.
In 2011 gold-mine production came in at an all-time record high. And in 2012 experts anticipate production to be even higher, edging above the previous year’s 87m-ounce tally. From the looks of it, the major source of gold’s supply is in fine fettle.
As gold enters into a season of fundamental strength and what should be a powerful new upleg, there ought to be rekindled interest in gold stocks. In fact, if gold indeed rallies the gold-stock sector will likely see a much-more-powerful upleg than the metal.
After taking a closer look at SIL, a case can be made that this ETF represents an excellent proxy for this high-risk high-reward sector. And as a new wave of investors find their way to silver stocks, SIL will be waiting with open arms.
Though SLV hasn’t actually taken much silver off the market over the last year and a half or so, there is no denying its impact since inception. And when silver starts to rock once again, SLV ought to see a healthy flow of stock-market capital.
To satiate the world’s growing hunger for silver, a lot of pressure has been placed on its supply chain. And with total annual supply recently exceeding 31k metric tons (1.0b ounces) for the first time ever, suppliers have made a valiant effort to meet demand.
While juniors don’t directly contribute to mine supply, their role in the greater supply chain is invaluable. The successful ones are making discoveries and proving up deposits that will eventually feed the supply chain.