Gold Miners: Finally!
Why were we able to hold on to our position, even though it was a loser for a long time and what you can do to make sure you aren't stuck being a multi-year bag holder!
Yes, finally gold and gold miners are running, and now gold miners are starting to outperform gold.
We bring this up because it highlights how… like a good cheese… buying deep unloved sectors can sometimes take time. Let us not forget how hard the slog has been. This has been a far from easy investment to say the least.
For those of you who were with us from earlier on, we ask ourselves: what were our thoughts come September 2022, having seen gold miners halve over the previous six months?
Digging up our fundamental view back then, for a long time we have been saying that all the money printing and quantitative easing undertaken by governments ever since the GFC is eventually going to play catchup.
The asymmetry existed across the sector, and so we simply had to make a decision around how much of the juicy pie we wanted to nibble on.
Our thinking being that governments couldn’t just keep reverting to ultra easy monetary policy to deal with every situation that came along.
We thought that ultimately this would result in a materially higher gold price.
Given all the shenanigans going on both monetary-wise as well as geopolitically, we figured that everyone, including us, will be surprised with the magnitude and duration of the upside to what promises to be a raging bull market.
We said this for years, but particularly after the corona scam. For a long time we had only losses to show for our convictions (which is why position sizing matters… it allows us to be unemotional).
Consider that from September 2020 to September 2022, gold miners were down about 50% and gold was down 20%.
Come March last year, gold was flat and gold miners were still down 36% (and down 60% relative to the S&P 500).
That is more than three years with nothing to show for… despite all the patience.
What was fundamentally different from 2022 to 2024? From what we can tell, nothing! The fundamentals for a materially higher gold price existed all the way along.
All it took was a catalyst, which was near impossible to predict well ahead of time. Hence the reason why we were invested and held the line all the way.
We would like to think that fundamentals are now eventually playing out.
Just one final point on gold miners…
Why were we able to hold on to our position, even though it was a loser for a long time?
Apart from our conviction in our fundamental thesis, it was our small position in gold miners. We only had a 5% initial position size. If we had a 20% position size, it is doubtful we would have been able to hold that position for the length of time we did.
⭕️ It’s critical that you position-size and allocate these positions accordingly. If you need to brush up on your portfolio management skills, then check out our asymmetric investing course.
