Take physic, pomp

gold or the miner?

A classic question for sector investors is whether to hold gold or gold miners, as the theory usually stuffed down your throat by experts (word used very loosely) is that a gold miner will offer you leverage to the metal and compound your profits. So let’s see.

We compare gold using its ETF (GLD) as the proxy, then some of the biggest goldminer names out there in Barrick (ABX), Newmont (NEM), Gold Fields (GFI), Goldcorp (GG), Buenaventura (BVN) and Agnico-Eagle (AEM).

This chart shows us how things have progressed in 2010 to date:

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So far this year, GLD has performed better than all the gold miners except NEM

Here’s a little longer time span, showing the 12 month period:

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So if we take 12 months as our benchmark, GLD has performed better than all the miners except BVN.

Now a step further back, as we consider a longer five year period.

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This time GLD’s 185% upside performance is trumped by three of the miners (AEM, BVN and GG), but really only AEM has put significant ground between it and its metal.

Overall, it seems to me that unless you were smart/lucky enough to have picked AEM out the pack a few years ago, holding gold is the better call and screw conventional wisdom. DYODD, dude.

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