From Louis James, Chief Metals & Mining Investment Strategist, Casey Research:
We often hear the claim that gold producers have not met investors' expectations for the past couple years. While there are many potential reasons for this, one explanation for their underperformance lies in the fact that producers diluted their share structures, leaving shareholders with smaller gains than they would have otherwise harvested.
To show how this dilution has impacted the industry, let's first review how gold miners performed last year compared to the S&P 500.
The chart is hardly a surprise: the precious-metals producers had a poor showing, losing 26.6% in 2012 – something we think will reverse this year – while stocks in the S&P 500 delivered a solid 14.2% annual gain.
We think that while last year's performance of the S&P 500 companies is commendable, the future may disappoint investors who believe the U.S. economic recovery is on solid footing: last week's GDP data suggest that our economy continues to struggle, something that was immediately reflected in the price of gold the day the news was released.
As 2013 progresses, we expect to see...
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