Geologists Weigh in on Picking Gold, Silver Stocks | ETF Trends

Whether it’s looking at price momentum or the fundamentals relative to the economic environment, everybody has their own way to analyze gold stocks, but what do geologists have to say?

Geologists study the Earth, and their knowledge of how precious metals play a role in the grand scheme of the natural environment could inform how to pick gold and silver stocks. A Kitco News report looked at the view of a pair of geologists: Brent Cook and Joe Mazumdar.

“You can look at about corruption, you can look at the Fraser Institute, there’s a lot of information out there on specific countries about where you want to go into,” said Mazumdar. “And, the majors and the mid-tiers all do that, because they want stability of taxes, they want to know that they have the ground, the security of tenure, and so when they actually enter a country, they have to be satisfied that exists. So for me, that’s the best proxy. If I’m exploring in a country that a major, mid-tier or some other people operate, then I’m happier about them being there.”

What should investors look out for?

“We’re seeing a lot of companies report grades in terms of gold equivalent or silver equivalent which means they bulk up copper, lead, zinc, silver…and throw in cadmium and whatever, those are different metals,” noted Cook. “For me, you can call it a gold equivalent per se, but the recovery you’re going to get on those other metals is going to be a lot less and that’s usually not factored into what the gold equivalent is. I want to see exactly how much silver there is, how much zinc there is, so I see those numbers as well, so I know what the grade of the primary product is.”

Play the Long Game With Precious Metals

As the old market adage says, the trend is your friend. When playing precious metals, it’s typically best to play the long game and embrace your inner buy-and-hold self.

Within a three-year time frame, gold and silver have been stellar performers. The latter has risen almost 70% versus its pricier counterpart, which is still up 46%.Gold Price in US Dollars ChartHowever, a three-year window doesn’t present a big enough sample size. That might present investors with more of a swing trade option when playing the long game.

In order to really capture the benefits of holding silver and gold long term, the chart has to be expanded all the way back to the late 70s. In this case, gold and silver have paid large gains to investors patient enough to hold them that long.

Gold is up over 670% while silver is up over 300%. Of course, with the allure of instant gratification, it takes a disciplined investor to be able to hold on to something for that amount of time.Gold Price in US Dollars Chart

For more news, information, and strategy, visit the Gold & Silver Investing Channel.