Tuesday, March 21, 2017

Gold miners vs Physical

No one shall be surprised to read that we have not changed our thesis on gold at this point for we remain bullish of gold in EUR and Yen denominated terms as we have for the past several years, noting once again that gold in EUR terms leads the way higher and is up 9.6% year-to-date while gold in US dollar terms is up 9.2%. 

Gold in Yen denominated terms is lagging behind the other two prices thus far this year as capital seems intent upon moving out of Europe and to other venues, with Japan being a prime venue thus far, perhaps simply because of the geographical separation of Japan from the political problems attendant to Europe presently and thus keeping the Yen “bid” vs. the EUR. However, we shall suggest that that Gold/Yen’s three year out-performance vs. gold in US dollar terms… unchanged vs. -7.5%… does “trump” the year-to-date figures.

As gold has risen in all currency terms in the course of the past several days there is some very real concern that gold mining shares have seriously under-performed. We share that concern for historically the mining shares are leaders to the upside and to the down, thus when we are bullish of gold but see the mining shares lag behind we become openly concerned that something is amiss. 

Nonetheless, the political confusion that does seem to reign at the moment in Europe generally as elections loom in the Netherlands and France does tend to keep us viewing gold positively.