I used to believe that the gold and silver miners were being manipulated as per the industry’s largest spokesmen… Jim Sinclair. However, I now believe the HEDGE FUND TRADE of being Long the Metal and Short the Miners is not particularly a manipulative trade to keep these gold and silver companies depressed. Rather, I think they may be making a smart trade.
Hear me out….
As I have been discovering, falling ore grades especially in the gold mining industry have played havoc on their bottom line. Costs are increasing exponentially due to the fact the world expects a growing supply of gold and silver. To continue growing the world supply of gold and silver, ore grades are falling faster and faster each year.
We must remember, back in the earlier part of the 1900′s, the world supply of gold or silver was a fraction of what it is today. To increase production year over year the mining industry didn’t have to burn through as much ore as they do today. Basically, the yearly increase in gold or silver production 100 years ago didn’t reduce average ore grades all that much.
However, we are seeing tremendous percentage declines in both gold and silver ore grades and yields due to the fact that so much more of the metals are being produced.
As Keith Baron stated…. World Gold Production is ready to fall off a cliff. I also believe silver will fall as well.
THE REAL REASON WHY THE MINERS ARE UNDER PERFORMING
I believe the real reason for the under performing gold and silver miners is due to the ongoing manipulation of the price of gold and silver. If gold was $5,000 an ounce and silver $200, the miners would be making excellent profits even if the costs increased due to the repricing of commodities when the worlds fiat monetary system implodes.
Again, I believe the Hedge Funds may have been making the right trade (even though we don’t like it) to take advantage of the ongoing CAMPAIGN TO MANIPULATE GOLD AND SILVER.