Gold mining shares don't always track movements in gold prices. Longtime market observers know there's not a perfect correlation and recent trading makes this abundantly clear. Gold miners are often leveraged whereas pure bullion doesn't come with any debt attached. Bullion's lack of such encumbrance has made it more desirable to investors as they pour money into bullion ETFs. Check out how the values of bullion ETFs have been bid up past the price of bullion itself, while the value of the top thirteen gold producers has lagged gold's market price.
Some hedge fund is probably working on a way to arbitrage this action, but a saner way ahead for the typical gold investor is to divide gold holdings between mining stocks and bullion. One very important caveat is the specious nature of gold bullion ETFs' accounting. Even bullion held privately (under your bed, in your closet, or some Swiss bank's vault) is of little use if it can't be divided into lots small enough to buy things.
Full disclosure: Long GDX with covered calls.
Some hedge fund is probably working on a way to arbitrage this action, but a saner way ahead for the typical gold investor is to divide gold holdings between mining stocks and bullion. One very important caveat is the specious nature of gold bullion ETFs' accounting. Even bullion held privately (under your bed, in your closet, or some Swiss bank's vault) is of little use if it can't be divided into lots small enough to buy things.
Full disclosure: Long GDX with covered calls.
