This may be a stupid question but why would I invest in a mining company if I am heavily invested in

tydye

I see many references on the board advising to invest in different mining stocks. But why would I want to finance someone to dig more metal out of the ground when I have a pile of it at the bank. I am not the brightest light bulb out there in investments but from a layman's point of view it does not make sense to me.

fivecents

Maybe because you have strong beliefs in the future of PMs? Strong enough beliefs that you are willing to break the rules and put all your eggs in one basket?

tydye

Not all my eggs are in one basket. But because of the run-up over the last year I now sit at about 30-35% PMs which to me is heavily invested in them. Balance in traditional investments - stocks, bonds, mutual funds etc.. But no mining stocks - even though people keep recommending them to me

CaptHenway

My mother used to buy gold stocks as a way of investing in gold without having to worry about storage or theft. And, it paid dividends. Me, I believe in physical metals and SDB's.

streeter

<< But why would I want to finance someone to dig more metal out of the ground when I have a pile of it at the bank.>>

The demand you have helped create has already financed them. The mining companys just hope you keep stacking. The more you stack, the more they make. The miners are kneeling and blowing kisses at all who are keeping the prices at these levels. That includes the pols and derivative originators.

The trick was in getting the mines up and running with the obstacles that are thrown at them by land use dictators. This is a window of opportunity for mining companys.

TheBigB

As the Capt said, in the past mining stocks were an alternative to physical possession. Now there are many new products like the GLD ETF for those not wanting physical.

I see the miners as a vehicle for those wanting more leverage when metals rise at the cost of more risk, only you can decide what fits your needs.

ksammut

<< <i>I see many references on the board advising to invest in different mining stocks. But why would I want to finance someone to dig more metal out of the ground when I have a pile of it at the bank. I am not the brightest light bulb out there in investments but from a layman's point of view it does not make sense to me. >>



One word - Leaverage

Sometimes PMs themselves will go up more quickly than the miners and sometimes the miners will go up faster. In the long run, miners will usually enjoy a greater return. With that said, I would suggest GDX or GDXJ instead of an individual miner or two. If you pick the right individual miner you can get lucky and see a huge return but when it comes to mining, anything can happen good or bad so it is better to go with a fund (ETF) that has a number of strong mining companies whether they be the majors or the minors.

As I have a number of silver miners (along with GDXJ and a few other ETFs), I have spread out the risk. My silver miners are up about 4 to 5 times while silver is up 3 1/2 times during the same period.

Do not get me wrong, I have a few thousand ounces of silver and some gold too and believe everyone should have a mix of the metals in hand along with mining shares.

Ken

percyb

Some people think that the stocks are undervalued. Hence, they by them.

roadrunner

From their low RSI troughs to their RSI highs, they are very tradeable in the short term (weeks)....then again any volatile/trending stocks are as well.
The latest run from March 16th to April 8th did well. The run from January 25th to March 2nd even better. But on the longer haul over the past couple of years, they have
underperformed bullion as a rule. They should have their time again as gold goes even higher assuming royalties, taxes, and nationalization doesn't eat them up up first.
The gold ETF's have diverted tens billions of dollars that would have normally gone to gold miners in the pre-2004 era. In this new world political and economic environment
there are conflicting opinions on whether miners can still really get back to what they once were.

roadrunner

ksammut

<< <i>From their low RSI troughs to their RSI highs, they are very tradeable in the short term (weeks)....then again any volatile/trending stocks are as well.
The latest run from March 16th to April 8th did well. The run from January 25th to March 2nd even better. But on the longer haul over the past couple of years, they have
underperformed bullion as a rule. They should have their time again as gold goes even higher assuming royalties, taxes, and nationalization doesn't eat them up up first.
The gold ETF's have diverted tens billions of dollars that would have normally gone to gold miners in the pre-2004 era. In this new world political and economic environment
there are conflicting opinions on whether miners can still really get back to what they once were.

roadrunner >>



Well said.

derryb

1. A way to play paper metal with a brokerage account, especially an IRA
2. Easy in easy out with low costs
3. Potential takeover of a junior stock could advance the stock price faster than spot price advances

tydye

Thanks for the advice everyone. Perhaps I will dip my toes in.

jmski52

Mining stocks have traditionally been a way to leverage movements in the price of gold, because they (allegedly) have in-ground reserves at a significantly lower cost than the above-ground cost of a refined ounce of gold. The question is, how much and how cheaply can the mining company make it happen?

Therefore, a mining company stock is basically an investment in the management team and the properties involved, neither of which is always easy to figure out.