Direxion Daily Gold Miners Be (DUST)

[Sgreg]

Most of the time they will follow gold, yes. I was saying they are not exactly the same trade though. Gold is a hedge but in my view mining companies are not. To clarify this is why.

Gold doesn't have a balance sheet. It doesn't have earnings. It doesn't have a debt burden. It can't go bankrupt either. Mining companies however have all of those things that can drag on them. Gold doesn't have baggage and mining stocks do to sum it up. Gold can be a hedge against the market but mining stocks will get killed with the market in the event of severe financial/market turmoil. Miners do well if the overall market is correcting or erratic but once a market turns from that to an actual crash then miners get the snot beat out of them with everything else. A good illustration would be 2008. Look at the charts back then. You will see as the market turned sour in Oct 2007 that miners did pretty good until March 2008. Then as the market moved from what looked like a correction or erratic or just a bear cycle into something more severe further into 2008, miners then crashed themselves.

It depends on the severity of the market selloff. If the severity isn't too bad then miners do well. If the severity is great then miners get absolutely smashed.

Remember mining companies have baggage and depend on banks for survival. Gold does not have baggage. That is the difference and why they are different trades in my view.