As anyone interested in gold knows, gold has risen for 11 consecutive years. Where it goes from here, time will ultimately determine. Readers of this blog know I think it still has a long way to run, determinable primarily by the Federal Reserve’s continued mismanagement of the money supply.

More perplexing has been the performance of gold stocks. For the early part of gold’s run, they outperformed the metal itself. In more recent periods, they have been terrible laggards both to stocks in general and to the metal itself. Adam Hamilton describes the situation:

The beleaguered gold stocks have spiraled lower this month, heaping misery on poor fools like me naive enough to invest in them.  Dwindling interest and capital has left this realm a desolate wasteland, I’ve rarely seen anything so deeply out of favor.  In fact, relative to gold the gold stocks are now back down to levels only seen briefly during 2008’s epic stock panic! Are they dying, gasping their last breath?

This question has enormous implications for speculators and investors.  If gold stocks are doomed to never rally again, we ought to cut our losses and move on.  But if this embattled sector is likely to return to favor in the near future, then its current extreme malaise is an incredible contrarian buying opportunity.

To get his full opinion, read Gold Stock Panic Levels.

For a slightly different perspective, read Chris Marchese’s article.

Both make reasonable cases for gold stocks. Yet both have probably been making these same cases most of the way down. Make your own judgment.