Will Junior Gold and Silver Mining Stocks Outperform their Larger Peers in 2017?

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In yesterday’s article about BTC, I wrote “it is always critical to track what is happening to the Chinese BTC market to understand what may happen to BTC prices in the future ” because “if the PBOC cracks down on BTC, they could cause another huge, rapid sell-off in BTC prices.” About 12 hours after I wrote this, after observing an environment of a large number of Chinese traders shorting BTC that predicted imminent new regulations, the Chinese government imposed new regulations on Chinese BTC exchanges, and BTC rapidly plummeted $100. Of course, with large global banks rapidly increasing their influence among blockchain development companies and other digital currencies, the Chinese government is not the only institution one has to worry about when predicting future BTC price volatility, but you can refer to yesterday’s article for more information about that topic.

 

Today, I want to return our focus to the 2017 global gold and silver outlook. As I stated to start this year, I still believe that 2017 will mark another strong year for gold and silver asset prices, and certainly this year has gotten off to a strong start. I mentioned in previous articles, that we utilized a lot of successful hedges and moved some positions to cash in December when bankers were raiding gold and silver to deal with the temporary downtrend in gold and silver assets while still remaining net long gold and silver assets, and then became more aggressively long after the raid ended.

 

As a result, our Crisis Investment Opportunities newsletter is now up 11.22% for the year and up 14.77% since 1 December to 8 February. However, our Platinum Membership, which focuses mostly on junior gold and silver mining stocks has returned much stronger returns during this short time period. Just looking at the returns of our Platinum Membership gold and silver stock allocation model, which focuses on nearly all junior PM mining stocks, including a recent rebalancing of our portfolio in February, this year our Platinum Membership gold and silver stock portfolio has returned about 18.59%. And if we go back just one more month to 1 December 2016, for our Platinum Members that joined at the start of December and assumed all open positions per our stock allocation model at that time, and then rebalanced the stock portfolio per our February rebalancing, the returns would be approximately 28.90% on our Platinum Members gold and silver stock portfolio in the period from 1 December to 8 February. And these returns are exclusive of the hedges we took during these months against the significant banker raid on gold and silver asset prices in November and December that produced significantly net positive returns as well.

 

So why have junior gold and silver mining stocks been outperforming their larger peers, when normally the risk of investing in the junior gold and silver mining stock asset class is much greater than investing in the mining giants like Barrick Gold, Goldcorp, and Silver Wheaton? To answer this question, we have to analyze and understand what happened during the 4-½ year decline in spot gold and spot silver prices between 2011 and 2015. During this time, the smaller, junior gold and silver mining companies, to survive the vicious banking industry suppression of spot gold and silver prices, had to implement a plethora of strategic moves, including cost cutting, streamlining operations, improving drill techniques, improving metal recovery rates, changing mining techniques to increase gross margins, and even shuttering non-profitable assets while seeking to re-open them after prices recovered. The best junior gold and silver mining companies were able to implement tactics, such as temporarily shuttering non-profitable assets, that their larger peers due to excessive debt burdens that had to be serviced, simply could not. Thus, when gold and silver prices finally reversed last-year, the best gold and silver mining companies positioned to benefit from this price reversal were the smaller, now more efficient companies, not the industry leading behemoths. Precisely because of this difficult gold and silver price environment from 2011 to 2015, the better run, more efficient gold and silver mining companies are primarily junior mining companies. And this will remain, true, in my opinion, for this year, and quite likely the next as well. And in our Platinum Membership, we just spent hundreds of hours uncovering what we believe to be the best junior gold and silver mining companies for 2017.

 

So after such a strong start to 2017 for our top junior gold and silver mining stocks, many of which have risen by 30% and more since December 1, will it be a continued push higher the rest of 2017? Of course not, as all stocks become overbought at some point in the cycle, and there will be corrections, and significant corrections that occur in 2017. However, despite these future significant corrections, which in the past, were often much more damaging than the corrections that occurred with the larger gold and silver mining company stocks, I believe that overall 2017 will be a year in which the best junior gold and silver mining stocks significantly outperform the best intermediate and large-cap gold and silver mining stocks.

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Posted: Friday, February 10th, 2017 @ 4:23 am
Categories: best gold and silver mining stocks, General.
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