Fun, the main problem with the bearish view on gold is, as you say yourself, that it is the CONSENSUS view.
as to the miners p/e's: the more they are hedged (e.g. ABX) the higher their p/e. the low p/e stocks are the unhedged miners or those with a small hedge book. naturally they are the ones that will profit the most from a turnaround.
to say that gold won't turn for another ten years is utter nonsense. nobody can make a reasonable forecast that far out. sure, it's not impossible, but i would never ever make such a prediction.
there are long term cycles which see periods of preference of paper assets over hard assets and vice versa. the current cycle is at a never before seen extreme right now. naturally at such a point predictions of vastly higher stock prices and much lower prices for hard assets abound - it always happens at extreme points in the cycle.
i am not saying that gold cannot go lower from here - it certainly can. in fact the charts suggest that another leg down is likely, a capitulation sell-off if you will.
but the turnaround, when it comes, will be swift and sharp and trap many shorts, including the producers that are heavily short. from all accounts the massive amounts of gold that have been leased and subsequently sold have been absorbed by the extremely strong physical demand. at some point however, the leased gold will have to be given back.
as for the gold mining stocks, many are trading at or near 20 year lows. that makes the risk/reward ratio rather compelling imo. yes, it will probably require some patience, but in the meantime many of these stocks, especially the S.A. producers pay very good dividends. another aspect of this is that out-of-favor asset classes usually are a great hedge against trouble in the currently favored asset classes. let's see where the gold stocks trade, say 1/2 year from now - i believe they will be a lot higher than they are now.
i concede that gold seems to have lost a great deal of it's former importance - however, that doesn't mean that the pendulum won't swing the other way at some point. aside from the peculiarities of the gold market itself, there is the fact that globally and specifically in the U.S. the mountain of debt and derivatives has grown exponentially in recent years. this will come home to roost, and when it does, gold will be rediscovered as a store of value.
regards,
hb |
