Gold miners have really started the year well with (NYSEARCA:GDXJ) up over 12% already this year. The question remains for many precious metal investors. Is it better to invest in mining stocks or Gold bullion or an etf like (NYSEARCA:GLD) which is only up 3% this year so far. Miners are far riskier especially if you pick individual miners. You have risks such as strikes, mine closures, cash flow problems, mines in unstable jurisdictions, etc. In saying all this though, many believe that you will gain far more leverage from mining stocks going forward compared to bullion. Why?. Because Gold has more or less tripled in price since 2005 whereas miners havent even come close..
In saying this if we get a nasty correction in the stock market, how will miners ( which still are equities) react?. Will they collapse like the market or stay strong?. Thats the one fear investors have with mining companies. If stocks collapse, capital may only flow into Gold bullion and bypass many mining companies. But do miners move. (NASDAQ:SSRI) is up over 13% in a week as silver is up over 5%. This stock topped out in 2011 at $35 a shares meaning it is 7 times off its 2011 high. You would think that if Silver shoots from here , mining companies should outperform bullion in the long run..
Nevertheless (NYSEARCA:GDX)&(NYSEARCA:GDXJ) are safer bets as they contain a basket of stocks each. Anything can happen to an individual miner so unless you have really done thorough due diligence on a mining company (especially a junior), stay small & stay diversified..