Gold vs. Mining Stocks

June 4, 2008 - Courtesy Nick Barisheff, Bullion Management Group,

The above chart shows the comparative performance of the largest gold mining companies compared to the performance of gold bullion. While some juniors and small producers may have outperformed bullion, their high risk and volatility detracts from any meaningful comparison. While the major gold producers outperformed bullion from 2002 to 2006, bullion has outperformed these stocks since mid-2006. Generally, mining stocks do correlate to the price of bullion, but during times of weakness in the equity markets they become correlated to the broad equity markets. The rising price of oil is a contributing factor to production costs. In today's market, a fully diversified portfolio should hold equities for speculative growth and, as core holdings, fully allocated, segregated bullion.

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