Precious Metal Stocks Are Not An Investment…They Are A Speculation

July 31, 2019


Let's start by defining investment and speculation, and for this purpose, I have used Investopedia:

An investment is an asset or item acquired with the goal of generating income or appreciation.

Speculation refers to the act of conducting a financial transaction that has substantial risk of losing value but also holds the expectation of a significant gain or other major value.

Precious metals such as physical gold and physical silver are an investment and can be acquired and held for long periods of time.

Precious metals mining sector

gold mining sector

The precious metals mining sector is not an investment for the simple reason that mines are being depleted of their treasure on a daily basis. Mining companies must either explore for new veins to mine, merge with other miners, or acquire new assets in order to keep their pipelines topped up. Otherwise production drops and investors flee. Indeed, we can all name a few mines that have been around for some time, but they are in the minority.

Ask yourself the question, why it is that the precious metals mining companies pay a dividend which varies from miserly to non-existent? May I suggest that the reason is because the money they earn is ploughed back into the business in order to secure continuity of production. When an investor acquires shares in a mining company, it is not for the dividends; it is for capital appreciation.

On the other hand, mining companies as a speculation are extremely risky, but from time to time, they offer the possibility of stupendous returns to the speculator. It is often said that there is no fever like gold fever, and the next one will be more spectacular than anything we have experienced in the past. I traded gold in the late '70’s and can vividly remember the euphoria that surrounded the dramatic rise in the price of both gold and silver. Is it different this time? You bet it is. The number of players back then was limited, but this time around anyone with a laptop or even a mobile phone, anywhere in the world can join in the fun at the press of a button.

Precious metals are cyclical, and they have been unloved for years, struggling along just to survive. In my very humble opinion, they have bottomed, and the bull market has commenced. Be warned though, it is not a one-way ticket to the moon; it is a gut-wrenching journey with many twists and turns and definitely not for the fainthearted.


If you are an investor by nature, then buy physical gold and silver and store them in a safe place, not a bank.

Timing is everything as this bull will not last forever. There will be a blow-off in the final stages as all bull markets come to an end sooner or later. This bull has a life span of around three or four years and then it's game over.

Conservative speculators should stick to the quality stocks as their capital gains will be handsome and offer the investor a tad less risk.

Adventurous speculators will need to look further afield in order to generate returns if you are targeting 10 and 20 baggers.

Hyperactive speculators may want to consider various options strategies in order to achieve eye watering profits, but beware when it doesn't go according to plan, it can be very costly.

Go gently,

Disclaimer: makes no guarantee or warranty on the accuracy or completeness of the data provided. Nothing contained herein is intended or shall be deemed to be investment advice, implied or otherwise. This letter represents our views and replicates trades that we are making but nothing more than that. Always consult your registered adviser to assist you with your investments. We accept no liability for any loss arising from the use of the data contained on this letter. Options contain a high level of risk that may result in the loss of part or all invested capital and therefore are suitable for experienced and professional investors and traders only. Past performance is neither a guide nor guarantee of future success.


A single ounce of gold (about 28 grams) can be stretched into a gold thread 5 miles (8 kilometers) long.

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