General Market vs. Gold Stocks

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SteveR's picture
SteveR
Status: Bronze Member (Offline)
Joined: Dec 4 2008
Posts: 71
General Market vs. Gold Stocks

Many of my economic heroes are advising us to not be fooled and to stay out of the general stock market.  And they usually recommend buying some gold and silver.  But what about gold and silver mining stocks?  Sure, long term, they are probably a slam dunk winner when inflation really kicks in, but many folks are expecting another leg down in the stock market this fall.  Will the gold and silver stocks follow that leg down?

Personally, I bought a lot of mining stocks in November 2008.  I'm sitting on huge gains (2x, 3x) but REALLY want to keep them until November 2009 to get a lower tax rate (i.e. long-term capital gain vs. taxed as ordinary income).  If I sell now, I pay a lot more to Mr. Taxman.  This is long-term investment money that I do not need in the near future for living expenses.

Can anyone with more knowledge or experience help me?  Thanks.

Ken C's picture
Ken C
Status: Platinum Member (Offline)
Joined: Feb 13 2009
Posts: 753
Re: General Market vs. Gold Stocks

Hi Steve,

 

I just sold all of my gold/silver mining stocks today. I took my profits and am almost all in cash now. Like you I believe that over the intermediate and long term it will be a good place to be. However, I believe that the mining stocks will also go down when the market tanks.

Logically one would expect that if the SP 500 tanks people would move into gold but I bet that all stocks will be sucked down with it. Just my opinion. And besides logic does not seem to apply to the market these days.

I plan to replace my mining stock positions later. It has to be a good place to be.

Good luck and let us know what you decide.

Ken

 

A. M.'s picture
A. M.
Status: Diamond Member (Offline)
Joined: Oct 22 2008
Posts: 2367
Re: General Market vs. Gold Stocks

Hey Steve,

I'd avoid them. The extraction profiles are what you want to look at, and there are no "amazing" veins being opened, and really haven't been in quite some time. While I'm not the authority on this, and perhaps my opinion is relative, I think the current price of tangible silver offers the best "prospect" of increasing rapidly in value and giving you a good return on your investment.

Cheers!

Aaron

Morpheus's picture
Morpheus
Status: Diamond Member (Offline)
Joined: Dec 27 2008
Posts: 1200
Re: General Market vs. Gold Stocks

Good posts Aaron, Kenc.

I'd stay out of mining stocks too. They are equities represented by businesses. And if their credit lines dry up then they'll crash too. Or plain crash by the momentum of the market. Now they may rebound, but the question is when, how far, and how long?

Why own stocks in gold mining when you can own what they produce?

I know the commodities markets are more manipulated than ever. But I put a lot of  of my money into commodities and certain foreign currencies. And not contracts either. Gold, silver, ammunition, ammo reloading supplies, seeds, physical foreign currencies, and other tanglible, durable commodities. Two storage units full. :)

I sold a lot of $400 worth of ammo, in pieces, for $965 recently (I keep the receipts) That's a 141% profit. And it'll only get better as I see it.

ivoryjackal's picture
ivoryjackal
Status: Bronze Member (Offline)
Joined: Oct 10 2008
Posts: 88
Re: General Market vs. Gold Stocks

Steve,

If you're sitting on 2x profits or more, that's a good reason to sell off half of your holdings.  This allows you to recoup all of your cash and from here on out you're playing with the market's money.  They can go to 0 and the worst you'll have is exactly what you started with.  Best strategy for dealing with stocks is to get the return *of* your investment as quickly as possible (it isn't always as easy as it may have been buying mining stocks at the bottom) and then keep some in the game if you still believe in the investment.

I can't really make personal suggestions on anything else givein that I don't know how much money you've got, how much PM's you may already own, etc.  There's good reason to have a core of gold or silver bullion for a worst case scenario financial situation if nothing else.  This is old wisdom and has yet to be proven false.

Daniel

ivoryjackal's picture
ivoryjackal
Status: Bronze Member (Offline)
Joined: Oct 10 2008
Posts: 88
Re: General Market vs. Gold Stocks
Morpheus wrote:

Gold, silver, ammunition, ammo reloading supplies, seeds, physical foreign currencies, and other tanglible, durable commodities. Two storage units full. :)

Wow, Pete, I think you are my hero.  I picture the bunker in Terminator 2 that she's set up in the desert, only better.

idoctor's picture
idoctor
Status: Diamond Member (Offline)
Joined: Oct 4 2008
Posts: 1731
Re: General Market vs. Gold Stocks

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