It seems that gold and silver stocks are trying to stabilize after the massive crash over the last many months. The recent lows have held on a few occasions, and the stocks are beginning to move in a range. The fall on Friday was also perhaps from the top of the new range. Since these stocks move in tandem with the prices of precious metals, any major move in that may change the scene pretty quickly. But the probability of major moves is less, and the current range bound moves are likely to continue. As per the Chairman of Franco-Nevada, the woes of the sector can also be attributed to the fact that many gold miners got a little carried away when the gold prices were booming. They started mining lower, and for lower grades to increase their reserves without caring too much about the costs. He obviously still believes in the long term outlook of gold despite the gloom. His optimism stems from the belief that gold will rise when the currencies get devalued. The mining companies are obviously banking on a turnaround in sentiments, and many have started acquiring strategic assets at cheap valuations. If the gold prices support, these acquisitions, especially in development stage companies are likely to bear fruits. Coeur D'Alene (CDE) recently hinted at some consolidation of assets surrounding its properties. It already has a stake in Pershing Gold Corporation (PGLC) which is about to start production in 2014, and plans to increase stake in some other properties/ companies. Even Franco completed the deal with Midas Gold for royalty rights recently. The valuations of the entire sector is very low now, and most of the companies are trading at a discount to their book values. However, despite the correction, Franco-Nevada is still trading at a P/E of 66, and the price to sales is also high. That makes it a little extra vulnerable to correction in case the sentiments deteriorate.
