Q: Is there any particular reason why the miners are doing so poorly against the price of gold? Is this a buying opportunity or is the market anticipating a downturn in gold prices? Would you prefer buying the metal (eg. GLD) or the miners (eg. AEM, ABX, BTO)?
5i Research Answer:
The issue is likely two-fold. One, until just recently, the US dollar has been very strong. With gold priced in US dollars, this has hurt international demand and the sector. But the bigger issue is costs: the sector has seen big increases in inflation and labour costs/availability. This has squeezed margins pretty much across the industry. We think investors can still buy the sector. WHEN interest rates and inflation peak (perhaps soon), things should improve and the US dollar could weaken (it has started to already, somewhat).