Traders Cooperative

[choad]

Why the miners haven't been participating in the steep rise in the POG is quite troublesome (perplexing) to me and makes me wonder if my large position in juniors has been a mistake. I think the ETF's may represent a partial explanation but that just doesn't seem to be complete. It seems as though the govt. has done a great job at masking the impact of inflation to our purchasing power......IMO, there have been many changes in calculating CPI/PPI since the last gold rush in the 70's, all of which have lowered the impact of escalating inflation in the mind of the public.
Secondly, it has been very hard for the gold stock investors (general public) to get very agitated about lose of purchasing power when their home , real estate and stock values were all escalating in lockstep.......this is now changing rapidly.
Third, there has been an increase in risk aversion as the above values have been contracting....... and the miners are often thought of as high beta risky investments. This can change abruptly as investors see POG increasing and look for alternative investments (not to mention the leverage offered by the juniors).
Fourth, mining costs have been rising substantially as POO has climbed to near the $100 level taking a big bite out of mining profitability......will this continue or are we on the cusp of the pendulum swinging the other direction?......I think the tide has turned and increasing POG will overcome increasing costs.......resulting in better profit margins.
Fifth, the macro environment is very tenuous right now.....will Chindia continue their robust growth and their appetite for
PM's and industrial metals? I think they will....there can be a hickup but I don't think you can turn back the clock.
Sixth, the juniors will be the takeover candidates of the producers as they try to replace dimnishing resources.
I have no golden answers to the divergence between the POG and the juniors but I wll continue to accumulate if the disparity widens.....it appears as though the next bubble comes due for the POG and the leveraged miners....we shall see......the next topic for conversation at your next party is just around the corner....it could be bumpy but I'll keep adding toward that conclusion, we shall see! We will know a lot more when Ben makes his decision tomorrow.