Will PM stocks go in down with a general market rout?
Some pundits suggests PM stocks will repeat their 2008/2009 poor performance if the general market suffers another similar major correction.
This time may be different. In 2008 when the market collapsed there was a flight to the perceived safety of the U.S. dollar and treasuries. During the Nightly Business Report last night Bill Gross was interviewed and after revealing that he had sold all U.S. treasuries from his mega bond mutual fund he was asked if viewers watching the program should get rid of their treasuries. Gross, ever the diplomat, refused to answer the question directly. He instead responded by telling viewers that they should invest in high grade corporate bonds, emerging country bonds, and anything outside of the U.S. For all practical purposes, Gross advised investors to get rid of U.S. treasuries as there will be few chairs to grab "when the music stops" and U.S. treasury yields head higher as the bond's value falls. So where does one flee to safety?
Today we learned that new claims for unemployment rose, the trade deficit rose much higher than expected, Congressional budget planners in Washington stalemated as deficit ceiling fast approaches, and possible uprising in Saudi Arabia looked more likely. Anyone of these events normally pushes precious metal prices higher, but not today. I suspect we get a delayed reaction in the coming trading days. The fundamentals for rising PM prices look to be baked into the ever expanding cake.
PM mining stocks may suffer along with major market selloff for a very brief period but also could easily break away from the crowd if the physical prices remain solid or push higher. I just can't believe a market correction will impact the PM miners like last time. Who knows for sure but I bought a load of GPL shares today near the lows and probably will cling to them even with any potential downward pressure in coming days. The long term trend not only remains intact but looks even stronger today.