Both $GOLD:$XAU and $GOLD:BGEIX fell well below their 50 day moving averages on Friday. One day doesn't guarantee anything, but it could signal an end to the Groundhog Day like beatings that the miners have suffered since May of this year.
Individuals can hedge market risk. The broader marketplace, however, cannot effectively hedge market risk. There is simply no one with the wherewithal to shoulder the market attempting to offload risk. Yet central bankers have convinced the marketplace that so "whatever it takes" includes a promise of market liquidity. And this perception of boundless liquidity has ensured a booming derivatives "insurance" marketplace.
There's a crisis scenario that's not far-fetched at this point. Fear that global policymakers are losing control spurs risk aversion. The sophisticated leveraged players panic as markets turn illiquid. The Trillion-dollar trend-following and performance-chasing Crowd sees things turning south. Worse still, illiquidity hits confidence in the ability of derivative markets to operate orderly. In short order securities liquidations and derivative-related selling completely overwhelm the market.
It's back to a momentous flaw in contemporary finance: Markets do not have the capacity to hedge market risk. Indeed, the perception that risks can easily be offloaded through derivative "insurance" has been instrumental in promoting risk-taking. Never have markets carried so much risk. And never have markets been as vulnerable to an abrupt change in perceptions with regard to central banker competence, effectiveness and capabilities.---Noland
Think about it this way--what good is a fund that is supposed to be invested in precious metals miners, if the "management" decides to NOT invest there and the miners go UP? Ultimately, you as an investor make the decision about what to invest in. BGEIX offers a relatively low cost vehicle for investing in PM producers. It isn't the fault of management that these miners have been in the worst bear market in history. It also will not be the intelligence of the managers that causes that to change. It will be the perception of other investors. In the meantime, you have the opportunity to buy a diverse group of investments in the industry that it professes to invest in--that's it--if you are worried about volatility, the group is NOT the place to invest. The turnover in this fund has only been 17% recently.
The move in the GOLD:BGEIX ratio has mimicked the 2008 experience. That ratio soared from around 50 to +130 in late 2008. This time the ratio has moved from 120 to +200 with BGEIX price slightly below the dividend adjusted 2008 low (5.51), with gold much higher in 2015 than it was at the ratio high point in 2008.
This fund invests in large precious metals mining companies. Its volatility is similar to the companies that it invests in which is high, compared to many other investments. Also, the number of larger PM miners is somewhat limited, so their choices are limited to provide what they profess to be. Remember the fund is investing in large companies that are profitable and have big cash resources. They aren't speculating in NUGT or DUST or like leveraged funds.
Of course gold miners are in the throes of their greatest bear market in history, especially in relation to gold the metal. The ratio of gold to BGEIX is higher now than it has ever been, exceeding 200 recently. The management is doing what the propectus says. If you can't stand the heat, get out. From these levels, though it is very difficult to see how things are going to get markedly worse for BGEIX as these companies are still generally very profitable and are selling for prices that are lower than 1990s levels when gold was far lower. Nobody knows the future, of course.
“Lenin was certainly right. There is no subtler, no surer means of over-turning the existing basis of society than to debauch the currency. The process engages all the hidden forces of economic law on the side of destruction, and does it in a manner which not one man in a million is able to diagnose….By combining a popular hatred of the class of entrepreneurs with the blow already given to social security by the violent and arbitrary disturbance of contract….governments are fast rendering impossible a continuance of the social and economic order of the nineteenth century.”
- John Maynard Keynes, The Economic Consequences of the Peace, 1920, page 235
"A number of analysts now question to what extent Chinese officials have a strategic plan. Insight from Iron Man Mike Tyson is applicable: "Everybody's got a plan until they get punched in the mouth." Did the U.S. have a plan in mid-2008? Europe? Did Japan in 1989? SE Asia in 1997? Without exception, policymakers were oblivious."--Noland
from comments section of an article:
Look at Barrick for example. It's gone down 84% in the last 5 years. It has a market cap of $7.8B, and it had over $10B in sales last year. It has a book value of over $11, but is trading under $7. Cash flow last year was $3.69 per share, with an operating margin of 25%.
The co-founder of Franco-Nevada, Seymour Schulich, owns 15 million shares of Barrick, the majority of which he bought in 2004 -and it is the only gold company he owns. Schulich says "As far as gold goes, I believe one needs to consider that the real level of inflation is running more like 9.5% to 10%. I think the number—2%—given by North American governments is absolute nonsense. Some reports suggest that major governments have been printing money at a rate of about 15% per year since the 2008-2009 financial crisis.I think you are going to see gold selling for at least $3,000 an ounce within the next three to five years."
Schulich says "It’s pretty simple. I am about 30% in cash, 30% in gold and 30% in gas. I have five stocks. Birchcliff and San Juan Basin Royalty Trust are my gas plays. I also own shares in Teva Pharmaceutical Industries, the world’s largest generics company. I own physical gold through the Royal Canadian Mint’s bullion exchange-traded receipts. I own one gold stock—Barrick. I think it has the five best gold mines that I know of, and I can see how it can dig out of its current problems. It has to reduce its debt by about $3 billion, and can probably do so by selling a piece of its Pascua-Lama project, so I am not worried."
I was reading Steve Saville this weekend and he put in a really important chart. Steve is the publisher of The Speculative Investor and is brilliant. He is a must read. The chart was an inflation-adjusted graph of the Continuous Commodity Index. It used to be called the CRB. Going back to 1956, on an inflation basis, the CCI is the lowest it has ever been measured.
So we don’t know if commodities in general will go down tomorrow or be lower a week from now, they might. For 100% of the time from 1956 until today, commodities were higher. So they might get cheaper but they are lower than they have been in 60 years.
We are absolutely going to have a tradable low in gold, silver and the vast majority of other commodities. They could go lower but we have everything in place for a tradable low. My opinion and it’s only my opinion is that we are going to have a barnburner of a rally across the commodity spectrum.
from 321 gold website
"Radically-greater upside exists in the beaten-down gold and silver miners! Just this week, their leading index slumped to an astounding 12.1-year low. The last time gold and silver stocks were trading at these dismal price levels, gold and silver were trading near $350 and $5! These miners are truly priced at fundamentally-absurd levels today with gold and silver 3.3x and 3.0x higher. They will greatly leverage the metals' gains."--Hamilton
Gold:XAU 20.89 at 7.17.15
Gold:BGEIX 179.60 at 7.17.15
I suppose we can wipe all the updates clean with new lows for BGEIX since 2008. In 2008 it fell below 6 for one day. Maybe this time more.
In the category of safe havens past and present, take a look at TLT from 2007 into the end of 2008. I foresee the same kind of performance for BGEIX, but a much bigger gain in 18 months than TLT. BGEIX is oversold the most in it's history. Bonds and the US dollar are ponzis that will be seen for what they are over the next 18 mos. This is a historic opportunity to save yourself a lotta pain and heartache.
I'd equate mid year 2007 in TLT to what mid year 2015 is for BGEIX. Good luck.
Jul 08, 2015 12:09 NY Time
Gold/XAU Ratio 19.21
Miners are stocks when stocks are down and gold when gold is down. Ratio is headed to 20 I suppose, although this is the anniversary of the Dow Jones Industrial low-in 1932 during the depression.
Gold haters having their day--I'm still adding here.
For all purposes we have merely been scraping bottom since November 2014. The 7.7.15 6.94 closing is virtually the same as the lows in Dec and Nov 2014 and we could certainly "beat" them.
So 7.7.15 was the highest close (IN HISTOREEEE :) for the ratio at 19.10--last couple of high closes late last year were in the18.90's. Gold:XAU missed the high of December by one tick. I guess there is plenty of time today on the anniversary of the 1932 Depression low for the Dow, to right that.