Silver and Gold Stocks still Suffering

Following this silver and gold bull market for the past 7 years, I have enjoyed watching the stocks sail even more than the periodic jumps of the metal.

My favorite scenes -
Excellon Resources soaring from .13 to my sell point at $1.30 in something like 18 months! I picked this stock after my own research and it was one of my better picks.

Of course Aurelian blew that one away...thank you Jim Puplava of Financial Sense.
What a gem that site is...along with Jim and John Loeffler. They are the band leaders of the commodity movement.

Now though, we barely get any life out of the precious metals stocks -they are hurting and have been for a long time.

Take today for example. Silver over $16.15 and yet the stocks are languishing. I think the stocks are caught in the slam of naked short selling along with people pulling there horns in generally because of the stock market drops setup around the world.

First and foremost, the mining stocks are stocks. Not forward options on metal - not even close, unless they are producing companies in safe countries that have not sold forward their production, and are selling at a reasonable discount. Many must be because they are not selling at a premium - yet.

Oil prices are seen as a proxy for the input cost of mining. Tires, machinery, energy, labor, all require oil. So if oil rises along with the price of the metals, then you have a sliding input/profits ratio. Both the numerator and denominator are increasing so the profit percentage does not change as much. This already happened as gold soared from $265 up to $800 and the profit picture did not scale because the input costs were rising at least as quickly.

The future holds more of the same. My back of the envelope calculations indicate that gold will have to out scale the cost of oil by 20% before the profit variables begin to turn favorably for the miners. Until then, the sales numbers will grow, but the profit percentages will not.

Should oil and gold hit $100 and $1000 together - the math will get clean.