Can You Strike the Mother Lode with Mining Stocks?

The Market Gage - Dillon Gage's Precious Metals Newsletter

Had you ever felt compelled to invest in Gold and Silver mining stocks instead of physical gold?

Let me share why I’m not a big fan of Gold or Silver mining stocks. I know you must be thinking why should he? He’s talking his book, he’s a bullion guy.

Ok I’ll except that thought, but in the next few lines I will share why I have never invested in such a product.

Here are my reasons.

First mining companies are not in the business of supporting the gold price. What I mean by that they are miners not gold investors. One must remember that when investing in a mining stock you are buying a balance sheet and the value of the stock is interpreted as an asset in a fiat currency. Let me define a fiat currency to clarify my explanation. Fiat money is a currency that a government has declared to be legal tender, but is not backed by a physical commodity. The value of fiat money is derived from the relationship between the supply and demand rather than the value of the material the money is made of. Historically, most currencies were based on physical commodities like gold and silver, but fiat money is solely based on the faith of government issuing the currency.

I’m sure we all wish we were back in the day where you can cash in demand notes for physical gold and silver, because I don’t think anyone will disagree that any currency is safe to hold on to.

Mining companies look for financial support to finance their operations. So an investment in a mining company is not an investment in gold or silver, but an investment in a company that is in the business of operating a mine. Hence in the end, you are buying a balance sheet not a physical product. True the stock price might appreciate in a gold bull market, but historically not at the one-to-one ratio that you might enjoy if you own the physical product. In retrospect, in a flat gold market with a declining stock market, one has the potential to lose value on his or her investment.

There is a lot more to share on the comparisons of the two investments, but by now I think you get the picture.

Yes, I am talking my book but when currencies become devalued, or the government debt gets out of control,
which book do you think will be on the N Y Times bestseller list?

Have a wonderful Friday.

Disclaimer: This editorial has been prepared by Walter Pehowich of Dillon Gage Metals. This document is for information and thought-provoking purposes only and does not purport to predict or forecast actual results. It is not, and should not be regarded as investment advice or as a recommendation regarding any particular security, commodity or course of action. Opinions expressed herein are current opinions as of the date appearing in this editorial only and are subject to change without notice and cannot be attributable to Dillon Gage. Reasonable people may disagree about the opinions expressed herein. In the event any of the assumptions used herein do not come to fruition, results are likely to vary substantially. All investments entail risks. There is no guarantee that investment strategies will achieve the desired results under all market conditions and each investor should evaluate its ability to invest for a long term especially during periods of a market downturn. No part of this editorial may be reproduced in any manner, in whole or in part, without the prior written permission of Dillon Gage Metals. This information is provided with the understanding that with respect to the opinions provided herein, that you will make your own independent decision with respect to any course of action in connection herewith and as to whether such course of action is appropriate or proper based on your own judgment, and that you are capable of understanding and assessing the merits of a course of action. You may not rely on the statements contained herein. Dillon Gage Metals shall not have any liability for any damages of any kind whatsoever relating to this editorial. You should consult your advisors with respect to these areas. By posting this editorial, you acknowledge, understand and accept this disclaimer.