Gold Equities Need More Bullion Support
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PortfolioDirect
Gold equities need the periodic adrenaline rush which comes with a rising gold price to sustain performance. The chart illustrates the leveraged response of gold equity prices (using the NYSE gold "BUGS" index ) to movements in the gold bullion price since the beginning of 2014. Unsurprisingly, the 7% fall in the gold price since late May 2015 has come with a larger fall - 28% - in equity prices. Gold equity prices are now set up for a 4-5X multiple response in the event of a rise in gold prices. From this perspective, the short term balance of risks has tilted in favour of equities. Without a higher gold price, however, margins will be compressed by rising costs and valuations eroded. A continuing fall in the gold price - even at the currently gentle pace - will erode already slim profit margins implying an accelerating fall in equity values. This plays into the longer term theme that the balance of risks favours holding physical gold (or a paper representation) rather than the equity equivalent.
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![John Robertson](https://assets.livewiremarkets.com/rails/active_storage/representations/proxy/eyJfcmFpbHMiOnsibWVzc2FnZSI6IkJBaHBBWXc9IiwiZXhwIjpudWxsLCJwdXIiOiJibG9iX2lkIn19--c2aa664b1ca2f7744d0c90464e98577955b66fe6/eyJfcmFpbHMiOnsibWVzc2FnZSI6IkJBaDdCem9MWm05eWJXRjBTU0lKYW5CbFp3WTZCa1ZVT2hOeVpYTnBlbVZmZEc5ZlptbHNiRnNIYVFISWFRSEkiLCJleHAiOm51bGwsInB1ciI6InZhcmlhdGlvbiJ9fQ==--a788536266c8d052a67a95e113f2ebbff3ad0a97/f9fff80c906634d4cd45b7e8cf6082d01376379067.png)
John Robertson is Chief Investment Strategist for PortfolioDirect a provider of resource sector investment stock ratings and portfolio strategies for mining and oil and gas investors. He has worked as a policy economist, corporate business...
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![John Robertson](https://assets.livewiremarkets.com/rails/active_storage/representations/proxy/eyJfcmFpbHMiOnsibWVzc2FnZSI6IkJBaHBBWXc9IiwiZXhwIjpudWxsLCJwdXIiOiJibG9iX2lkIn19--c2aa664b1ca2f7744d0c90464e98577955b66fe6/eyJfcmFpbHMiOnsibWVzc2FnZSI6IkJBaDdCem9MWm05eWJXRjBTU0lKYW5CbFp3WTZCa1ZVT2hOeVpYTnBlbVZmZEc5ZlptbHNiRnNIYVFISWFRSEkiLCJleHAiOm51bGwsInB1ciI6InZhcmlhdGlvbiJ9fQ==--a788536266c8d052a67a95e113f2ebbff3ad0a97/f9fff80c906634d4cd45b7e8cf6082d01376379067.png)
John Robertson is Chief Investment Strategist for PortfolioDirect a provider of resource sector investment stock ratings and portfolio strategies for mining and oil and gas investors. He has worked as a policy economist, corporate business...
Expertise
No areas of expertise