Tyke: Hedges put on at earlier, higher, base metal prices don't usually run for long enough to prevent the market from discounting the future of such base metal hedgers. My point was that base metal producers, not mining something that is itself money (as I believe gold is), depend upon such flotation devices as hedges. The air eventually leaks out of such floats and I expect it will refilled at lower pressure--thus, less income as hedge prices fall.
For me, at least, speculating in gold stocks is a hedge position against market/US$ collapse. Well-chosen gold stocks offer upside no base metals ever could. Like many hedges, gold stock prices have underperformed for a long time. That hurts only those who bought them primarily for price appreciation, rather than as insurance with a big price kicker in certain circumstances.
I'd never buy a gold stock if I thought demand for gold will remain driven by jewelry and other existing uses. Then it would be a commodity no more precious to investors than base metals, and often less, since they're consumed more in their uses. In buying for price appreciation, I try to ride the very powerful LT trend favoring intellectual capital over inert matter. You have to have the matter, but it is not where the value is. It's hard for me to see base metal stocks as good LT buys. Maybe ST plays, if you see mispricing at a cyclical inflection point?
Re: your comments ...
When mineral production has been sold forward, isn't the producer digging up money ?
With the US dollar falling, aren't forward sales in rising currencies desirable? |
