Mining Stocks, Chinese Demand, and a Potential Golden Surprise

By: Ryan Jordan | Wed, Feb 12, 2014
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Over the past couple of days, the performance of the gold and silver mining stocks deserves more attention than it is getting. As many of us argued, the collapse in mining stocks into late 2013 was nothing more than professional liquidation-- meaning players who should have known better simply giving up and moving on to some other, hotter, investment. I'm sure many of these managers talked themselves into believing that gold and silver were heading far lower than in they in fact were, and I know that other asset managers had had enough of cost overruns and waste on the part of mining CEOs. Couple this with how loathed the mining shares were among gold and silver bullion investors (and I have the emails to prove it), and I felt you had all the ingredients for a great contrarian trade.

Without getting ahead of myself, and fully realizing how far these mining stocks still have to go just to break even with where they were last year, it looks to me as though mining stocks that were literally priced for oblivion are in fact coming back to life. Those same mining executives may just have learned some lessons regarding the ability of gold and silver to go down as well as up and will not make the same mistakes in terms of unrealistic acquisitions going forward.

At the same time, you have confirmation just this morning of how powerful Chinese gold demand is with the news that China surpassed India in terms of gold demand last year. Anecdotally, the trend continues into 2014, as prices are just too low for Chinese gold buyers to resist. Meanwhile, many Western repositories, like the COMEX continue to report dwindling stocks of deliverable gold.

And what happens if the Indian government actually allows its citizens to buy gold again? While many have been burned buying into the hype of physical bullion shortages, if it is true that last year's Chinese demand was not simply a one-off event, and if it is true that the Indians may get back in the game in terms of gold buying, I just don't know where the gold is going to come from. Even as the gold and silver price can ignore physical demand for a while, they can't do so forever.

The evidence keeps mounting that last year's Wall Street induced precious metals crash was the real one-off event, and not the record amounts of gold imported into China, or its strong demand as money globally.

 


 

Ryan Jordan

Author: Ryan Jordan

Ryan Jordan
Silver News Blog

Ryan Jordan

Ryan Jordan has been blogging about the precious metals since 2010. However, his interest in the precious metals markets spans nearly 20 years as both a coin collector and private trader. Ryan believes there is a lack of serious discussion of how undervalued precious metals like silver are, and he aims to explain the many reasons why people should take silver investing seriously without relying on hype, sensationalism, or scare-tactics. Ryan Jordan recognizes that assets like silver serve a dual function: one, as a real asset that can provide portfolio insurance as a non- correlated investment, and two, silver can appreciate significantly in a short period of time. Silver could be the best performing asset you could own, with or without a significant crash in the dollar, or other financial mishap. Ryan Jordan's articles have appeared at financialsense.com, gold-eagle.com, investing.com, jessescrossroadscafe.com, silverbearcafe.com, silverstrategies.com, wallstreetformainstreet.com and numerous other sites.

Ryan Jordan believes a historical perspective is absolutely essential for anyone trying to navigate today's financial markets. It is this unique historical perspective that he tries to work into his analysis of the silver market. Ryan received a B.A in History from the University of California- Los Angeles in 1998, a M.A. in History from Princeton University in 2001, and the Ph.D in History from Princeton University in 2004. His professional research involves the history of social movements, religion, and freedom of speech in American history. His two most recent academic books include: Slavery and the Meetinghouse: The Quakers and the Abolitionist Dilemma (1820-1865) and Church, State ,and Race: The Discourse of American Religious Liberty (1750-1900). As a peer-reviewed historian, his articles have appeared in The Journal of the Early Republic and Civil War History. Ryan has taught US history at all levels, ranging from undergraduate to graduate students, at Princeton University, Lafayette College, the University of California-San Diego, Mesa College and Palomar College. Currently he teaches at the University of San Diego and National University, in La Jolla, CA.

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