Investing in Gold Mining Stocks: A Short-Term Play, Not a Long-Term Investment
Are you considering investing in gold mining stocks for the long haul? Think again. Our analysis shows that gold mining stocks should be viewed as short-term or intermediate-term trades, not long-term investments. For a long-term investment in gold, it’s best to buy gold bullion.
A historical chart spanning over 100 years reveals a downward trend in gold mining stocks relative to gold bullion since 1968. This trend is likely to continue as long as the current monetary system remains in place. The current system fosters more mal-investment within the gold mining sector compared to the pre-1971 monetary system.
Interestingly, the gold mining sector tends to boom during economic busts, while experiencing busts during economic booms. With the developed world in an economic bust phase since 2022, we anticipate a multi-year boom in the gold mining sector.
Despite the economic conditions, the gold sector hasn’t seen significant price action due to slower economic progress and stiff competition from other sectors. However, we expect strong earnings growth in the gold mining sector over the next 12 months, contrasting with flat or declining earnings in other sectors as the economy heads towards recession.
In conclusion, we predict boom-like price action in the gold mining sector in the coming year, with the HUI potentially trading above 600. While the sector may remain in a long-term downward trend relative to gold bullion, there are opportunities for profitable short-term trades. Keep a close eye on this sector for potential gains in the near future.