Gold stocks have been among the leaders of the Q1 rally, but are not yet unique
It seems that all too often lately the gold mining sector is in tow with commodities in general and broad global stocks in its ups and downs. As a leader, but not THE leader of the rally that is fine for now as long as we’re still on the back end of the originally projected Q4-Q1 rally in broad asset markets.
But if I am correct in the view of a real bull market in gold and especially the miners, at some point this will have to change. Gold miners are counter-cyclical businesses and the fact that their cost inputs like energy, materials and even human resources are rising in cost is not positive. While the fact that gold has been outperforming most of these for the last 3 to 6 months is positive, the real play will begin when investors look at their portfolios, beaten to a pulp, and see only one sector (or one of a very few sectors) rising while a bear market resumes in cyclical, risk ‘on’ assets.