Why Gold Stocks Suck

“Gold stocks suck,” said fellow newsletter writer Eric Coffin in a presentation at the recent Cambridge House Investment Conference in Calgary. I could not agree more.
Let’s review the fundamentals to understand why his words ring true.
Most micro-cap resource stocks were immersed and have stayed underwater since a sector-wide high in early March 2011. The Toronto Venture Exchange Index, which serves as a good proxy, is down 43% from that period of time. Weakness in the resource sector has occurred despite record or near-record prices for most commodities in 2011 and continuing high prices into the second quarter of 2012.
Reasons for the decline in junior exploration and mining stocks are many:
• The Japan earthquake and tsunami in mid-March 2011 resulted in a significant downturn of the world’s third largest economy and substantial damage not only to the uranium industry but to the entire resource sector. Some mining operations have been substantially affected by delays in delivery of heavy equipment from Japanese manufacturers.
• Private placements in Q4 2010 and Q1 2011 became free-trading and began hitting the market four months before the summer doldrums started. Professional investors and speculators
essentially front-ran the old adage, “Sell in May and go away.”  (more)