In his latest Forbes column, James Grant of Grant's Interest Rate Observer writes about John Hathaway of the Tocqueville Gold Fund. And of the differences in performance between gold bullion and gold mining stocks.
One interesting bit is where Grant reports asking Hathaway why he (Hathaway) didn't own GLD (the gold ETF) instead of the miners:
Hathaway says that investing in this exchange-traded fund, StreetTracks Gold Trust, which tracks gold prices, not mining company stocks, might
have made sense a couple of years ago. But it's not necessarily the
most enlightened course of action today. So miserable are mining
company returns on equity, so marginal are the overall economics of the
business, he says, that a change in the price of gold should translate
into a much larger change in the profits of a miner. "Let's just hope
that the industry does a better job in managing their prosperity than
they did before," he says.
Regular readers of this blog know I don't hold gold stocks or bullion at this time. (I did own the Central Fund of Canada before launching this site.)
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