A New Gold and Silver Boom Thanks to Bernanke

On the other end, Hecla Mining Company (NYSE:HL) said last month it has begun hedging all of its metals once they’re shipped as a means of protection from price volatility. The company said it had sold about 40% of its 2.2 million ounces of silver production in June, a month that featured a lower average silver price than that of the second quarter. It bemoaned the fact that silver prices fell 40% to $16.27 per ounce while spot prices dropped 21% to an average of $23.17 per ounce.

The positive note to take away from this is that Hecla Mining Company (NYSE:HL)’s cash costs net of byproduct credits were still $5.56, down 21% from the first quarter.

Gold miners face the same conundrum. Ashanti Gold caused the precious metals miners to acknowledge the risks of hedging, as it took on contracts at precisely the wrong moment as gold spiked more than a decade ago. Subsequently sold to AngloGold Ashanti Limited (ADR) (NYSE:AU) on the cheap because it was in such a weakened financial state, Ashanti became a cautionary tale for hedging — and of doing business with Goldman Sachs Group, Inc. (NYSE:GS), which played all sides in the miner’s downfall.

Interestingly, it wasn’t that long ago — days, really — that Goldman Sachs Group, Inc. (NYSE:GS) was once again advising gold miners to hedge their production, forecasting prices would fall as low as $1,050 per ounce. In the wake of Bernanke’s full throttle speech, however, the investment banker reversed course and now sees more upside to the yellow metal. Yet just last month it was recommending investors sell their gold, even though it was a buyer itself.

The miners seemingly have avoided falling into the trap again of listening to the investment banker, and investors should take heart that they’re better positioned to reap the windfall of the coming boom. Yet if Marc Faber is right, investors would do even better by being in physical possession of gold and silver than in stocks or ETFs trading in them.

The article A New Gold and Silver Boom Thanks to Bernanke originally appeared on Fool.com and is written by Rich Duprey.

Fool contributor Rich Duprey has no position in any stocks mentioned. The Motley Fool recommends Goldman Sachs.

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