I've posted before about the role the gold ETFs are probably playing the the underperformance of gold mining stocks. Put simply, investors wanting gold exposure, but wanting to avoid the hassles of buying bullion from dealers, can now just buy the bullion ETFs. Previously they'd buy the miners as a proxy.
Over the weekend, the Financial Post in Canada ran a feature article on this subject, and it makes for good reading.
An important part touches on something covered on Controlled Greed previously:
If gold miners want to convince investors that their stocks are a better investment than bullion, they have one obvious ace in the hole: yield, which you can’t get from physical gold.
Every significant gold producer in the world has either introduced or increased its dividend in the past year. It is genuinely the first time in history that these companies, which made no money for decades, have spare cash to burn. Their theory was that paying dividends would suddenly make gold stocks appealing to value and income investors, but experts say that it still has not happened to a significant degree.
To repeat myself, Newmont Mining (NEM) recently announciing that it will be linking its dividend to the price of gold could be a game-changer for the mining industry.
Will it? We'll just have to wait and see.