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<p>[QUOTE=&quot;medoraman, post: 960367, member: 26302&quot;]Great insight, that is the half of the equation that most PM investors overlook. Yes, with increased economic activity demand for commodities go up, so this aspect of the relationship is a direct positive relation to stocks. However, the part that most PM investors know is that during bad times people flock to the safety of PM&#039;s. The way these two types of demand intertwine is the complicated part, resulting in a non-inverse and non-direct relationship between stocks and PM&#039;s.</p><p><br /></p><p>The reason mining stocks have more of an inverse relationship to stocks is that during good times even if demand is up they have higher costs to extract. In worse times, it is assumed it is easier for them to keep costs down while still selling the metal for a premium. Hence, if you believe the Miner has the ore to extract, Mining stocks are actually a better stock hedge. One caveat, since this is widely known, mining stocks inherently have a higher premium versus earnings than normal stocks, since this relationship is valuable to balance portfolios. Therefor, only investing in mining stocks will result in poorer performance, unless the economy truly does &quot;crash and burn&quot;.</p><p><br /></p><p>Chris[/QUOTE]</p><p><br /></p>

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