Gold mining stocks, as measured by the AMEX Gold Bugs Index (HUI), are down nearly 40% from their August 2011 high. Representative ETFs such as GDX and GDXJ as down similar amounts, if not more. Mining company stock prices look to be falling into the abyss.
While buying mining stocks here could certainly look foolish in the near-term, NOT accumulating positions, or selling them for that matter, is likely to be the bigger mistake over the long term.
Gold mining stocks are attractive here for three primary reasons:
1. The sentiment on gold, and gold mining stock in particular, is at extreme bearish levels.
2. They are historically very cheap by a variety of relative and absolute measures of valuation.
3. The macro environment is likely to turn very supportive, thereby improving the fundamentals of the stocks, reversing the negative sentiment, and driving the valuations higher. . . .
No comments:
Post a Comment