The drop in price of precious metal mining shares has been one of the most interesting happenings in the markets over the last few years. Not only has precious metal bullion found a comfortable support level, but these miners are providing an important resource for industry, if it is financial by gold or silver by technology. So how has price dropped so?
I have no answer, but I can stipulate; dropping the price of miners can cause a panic that could lead to a mitigation in the price of bullion due to investor sentiment but also by forcing them to sell more product than wanted to keep their balance sheets even. Yet it could also create oppurtunity for those miners who manage their positions, because if they can find support, buyers could come in and invest, and they could also hold back product and cause a supply crunch.
Who is shorting? It is likely that it is institutional investors. Looking at stocks, the PM miners and financials are down in lockstep. It is likely that the proxie Banking Houses are doing the bidding and bleeding their books to mitigate the prices of the gold sector, because if miners stay down sentiment may be kept from buying bullion, and vice versa.
It has been a hard year for miners, but those that managed themselves best should see great upside if bullion prices start to rise soon. The move up in bullion could not only move the mining sector dramatically, but could lead to even more bullion investing. If one moves, the other should respond. The two investments, bullion and shares, could build on each other to create the next leg up for the gold sector.