Alan Brochstein investigates the divergence between gold commodity prices and gold-mining stocks
One of the star performers this year has been gold, which, even after its recent correction, is still up about 15% in 2011. The gains over longer periods of time have been even more impressive, increasing about 180% over the past five years while commodities in general, as measured by the CRB Index, have been essentially unchanged. The appeal to gold investors has been diversification as well as protection against potential inflation in the future.
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While the underlying metal has been precious, to say the least, the companies that mine gold haven’t exactly posted spectacular performance lately. In fact, some of the biggest companies are actually down so far in 2011. Higher labor costs and energy prices have weighed heavily on the mining industry. Additionally, a clear investor disdain for stocks generally hasn’t helped. Over longer periods of time, I've noticed the miners tend to track the metal, so perhaps there is an opportunity here.
Disclosure: Alan Brochstein is currently holding no positions in the securities mentioned in this post.