As investors, one of our main goals is to keep various market movements in perspective. Yesterday, January 21, 2008, the Canadian TSX stock exchange fell over 600 points, leaving many investors with a feeling of panic. As mining equities were dragged lower in the down draft of the TSX fall, many precious metals investors questioned their decision to invest in commodities and now wonder if the bull market is over.
Although it is logical to be concerned with a 600 point drop in the major index we do not believe all markets should be lumped into one group. In other words, just because the general stock market tumbled lower it does not mean all markets are of poor value.
Unfortunately the market research of many investors consists of a quick glance at the nightly news business review which displays the various markets daily performance. It seems that once these news casts show a market such as the TSX with a large number and red arrow pointing down beside it, investors panic. It is understandable that such a short term perspective could cause concern, but what about the bigger picture?
In the above charts you will notice that we included the price performance of the entire bull market for both silver and gold. In doing so, a minor, one day pull back in precious metals alongside a larger pull back in Canadian stocks can be kept in perspective. Given the recent advance in the precious metals we believe a temporary break should be considered normal. The pull back in stocks may strike fear in many investors, but as precious metals investors we are less concerned and we do our best to not panic in such situations.
It is true that many of our precious metals equities have experienced price weakness recently. We must keep in mind that mining equities ultimately derive their value from the commodity they are producing or exploring for, therefore we are more concerned with the overall relative value of the commodity itself rather than short term price fluctuations of mining equities. In our opinion, long term silver and gold are still undervalued relative to other asset classes.
At www.investmentscore.com we try to keep short term market movements in perspective and seek out asset classes that appear to be of good value relative to other asset classes. To sign up to for our free newsletter and to learn more about our investment philosophies please visit us at www.investmentscore.com.