Top Silver Mining CEO Sees Silver Outperforming Gold by Factor of 7
Neumeyer notes that silver is being mined at a rate globally of 9 ounces for every 1 ounce of gold. Yet it currently takes 68 ounces of silver to buy an ounce of gold in the spot market. First Majestic’s CEO is betting that the gold:silver price ratio will over time move toward the 9:1 mined ounces ratio. That implies a HUGE outperformance in silver prices going forward.
So far this year, silver is outperforming. But it’s the silver and gold equities that are exhibiting the biggest gains. A big reason for the explosive gains in mining stocks this year is the fact that they crashed in the preceding four years to reach levels of extreme undervaluation versus the metals they mine.
The risks entailed by owning mining companies instead of the metal itself are far greater. The upside potential in the stocks is also greater than in the bullion. But actual real-world returns going back decades show that gold has delivered superior risk-adjusted returns and better absolute returns than gold stocks. The price of the physical metal is also less volatile.
http://www.gold-eagle.com/article/what-surging-mining-stocks-mean-metals-markets
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