Gold and Silver Miners to Outperform Bullion?
The precious metals rally is growing wildly, and it's still got a lot of upward momentum to fulfill before this bull market ends.
Hundreds-of-thousands of investors are still exiting cash and treasury holdings and opting to put their wealth in gold and silver instead. And they're going for the miners over bullion in many cases.
After the U.S. officially announced QE3 last month, central banks around the world followed our example and began initiating quantitative easing measures as well.
According to Jeb Handwerger with ETF Daily News, the fundamentals for gold (NYSEARCA:GLD) and silver (NYSEARCA:SLV) are making positive moves after the ECB and Bank of Japan simultaneously signaled Worldwide QE.
The charts are just now beginning to reflect how those actions have impacted the uptrend for gold and silver – signaling there is much more room to grow...
Just this past summer, retail investors held their largest cash position in years. Now, they're seeking to hedge the coming inflation crisis as the Central Banks aim to “increase inflation to promote spending and investing” in hopes that will create more employment opportunities by giving retailers and small businesses incentive to hire.
After QE2, juniors underperformed... but things are turning around. They have broken a steady 18-month downtrend and are now outperforming gold and silver bullion.
In the month of September alone, investors put $306.7 million toward Market Vectors Gold Miners and $181.9 million toward Market Vectors Junior Gold Miners. Since August, investors have put more money in miner investments than bullion.
From ETF Daily News:
Since the expiration of QE2, gold outperformed silver, the large producers (NYSEARCA:GDX) and the small miners (NYSEARCA:GDXJ). However, that trend appears to be reversing as the cash strapped junior miners are getting more interest from the cash rich majors and royalty companies who need to look for resource growth. Notice the major royalty deals that Silver Wheaton (NYSE:SLW) just recently signed for the first time since 2007.
The majors are hungry for growth and are sitting on large cash positions which is losing value as Central Banks print dollars. Too many dollars chasing dwindling supplies of precious metals may cause a major price spike. The majors must invest in the junior miners which in a bull market could provide great leverage and move exponentially higher in percentage terms than bullion.
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