Are Mining Stocks a Trap? Mike and Alan Break Down 50 Years of Data

“Gold is great, silver is great… but what about miners? Isn’t that just a leveraged play on gold and silver?” 

It’s a fair question. Mining stocks sound like the logical next step for anyone who believes in precious metals. If gold goes up 10%, shouldn’t miners go up 20%? 

In the latest episode of The GoldSilver Show, Mike Maloney and Alan Hibbard put this theory to the test using five decades of performance data — and the results might surprise you. 

Spoiler: Gold crushed the miners. And it’s not even close. 

Gold vs. miners: The data that changes everything 

Alan walks through a series of charts comparing the Barron’s Gold Mining Index (BGMI) — made up of only top-tier mining companies — to the price of physical gold, starting from August 15, 1971, when gold became free-trading. 

Here’s what the data shows: 

• Gold has outperformed top miners by a factor of 6.5x since 1971 

• When indexed to 100, gold climbed to 9,855 while miners only reached 650 

• Measured in real money (gold), miners lost 88–90% of their value over the long term 

Even the best mining companies — the “Rolls-Royces and Lamborghinis of the industry,” as Mike puts it — couldn’t keep pace with physical gold. 

And here’s the kicker: these are the top-tier miners. The ones with the best management, the best deposits, and the best track records. 

If you had invested in mining stocks at the peak in 1967, you’d be down 93% in real money terms by the end of the chart. 

Why mining stocks underperform: The inflation problem 

So what’s behind this underperformance? 

Mike pulls no punches: “Mining companies are the greatest inflators on Earth — even more so than the Federal Reserve.” 

Here’s how it works: 

When you buy a stock on an exchange, you’re buying it from another trader. Your money doesn’t go to the company — it’s a zero-sum game between investors. 

But when mining companies do private placements to raise capital, they create brand-new shares. Your investment goes directly to the company, which sounds great… except it dilutes everyone who already owns shares. 

And mining companies do this constantly. They’re always raising capital, always issuing new shares, always diluting existing shareholders. 

Over time, this relentless dilution destroys value — even if the company is successful. 

Mike’s friend invested in a dozen private placements with top analysts like Eric Sprott behind them. Gold has more than doubled since then. Silver has nearly tripled. 

His friend is still down 21%. 

When miners do outperform (and why timing is everything) 

To be clear: Mike and Alan aren’t saying you should never own miners. 

There are narrow windows — usually lasting six months to a year — when mining stocks can and do dramatically outperform gold. Alan’s chart shows these brief periods where the black line shoots upward. 

Mike himself caught one of these legs in the early 2000s. He bought 53 different mining companies using the “shotgun approach” and did spectacularly well. 

But here’s the catch: the leverage works far better on the downside than the upside. 

As Mike explains: “If gold gains $3 and loses a dollar, gains $3 and loses a dollar… the stocks are gaining $6 but losing $5, then gaining $6 and losing $5.” 

Over time, those drawdowns compound. And when the crashes come — like the one from 2007 to 2011 — they’re breathtaking. 

Alan puts it bluntly: “If you think you’re smart enough and talented enough to nail the bottom and sell at the top, be my guest. But I think you’re gonna get slaughtered unless you’ve got professional help.” 

Alan’s 5-point checklist before buying miners 

So when should you buy mining stocks? 

Alan lays out five criteria that need to be in place: 

1. You’ve already taken a position in physical gold and silver (miners come after your foundation) 

2. You have a pile of gambling currency (money you’re willing to lose) 

3. Miners are undervalued compared to physical (not overheated) 

4. You have a short time horizon (the longer you hold, the worse your odds) 

5. You have professional help or expertise (subscriptions to quality mining newsletters, or you’re an analyst yourself) 

Mike’s advice echoes Robert Kiyosaki’s principle: “Investing is a team sport.” 

If you’re going to play the mining game, you need professionals on your side — people like Jeff Clark or Dave Morgan who analyze these companies full-time. 

Without that? You’re flying blind. 

The verdict: Physical wins (and it’s not close) 

Physical gold has dramatically outperformed even the best mining stocks over the long term. The downside risk in miners is far more punishing than most investors expect. And the windows when miners do outperform are narrow, rare, and nearly impossible to time without expertise. 

If you’re deciding between physical metals and mining equities, this episode could save you from years of underperformance. 

Investing in Physical Metals Made Easy

People Also Ask 

Do gold mining stocks outperform physical gold? 

Over the long term, physical gold has dramatically outperformed even top-tier mining stocks. Since 1971, gold has beaten the Barron’s Gold Mining Index by a factor of 6.5x, and when measured in real money (gold), miners have lost 88–90% of their value. While miners can outperform during brief windows (typically 6 months to a year), these moments are rare and difficult to time without professional expertise. 

Why do mining stocks underperform gold? 

Mining stocks underperform gold primarily due to share dilution and capital raises that destroy shareholder value over time. Mining companies constantly issue new shares through private placements to raise operating capital, which dilutes existing shareholders even when the company is successful. Additionally, the leverage mining stocks provide works far better on the downside than the upside, meaning losses compound more severely than gains. 

When should I buy mining stocks instead of physical gold? 

You should only consider mining stocks after you’ve already established a position in physical gold and silver, and when five specific criteria are met: you have gambling money you’re willing to lose, miners are undervalued compared to physical, you have a short time horizon, you have professional help or expertise, and you can diversify appropriately. Mike Maloney and Alan Hibbard break down this complete checklist in their latest GoldSilver Show episode. 

Are gold mining stocks a good investment? 

Gold mining stocks can be profitable during narrow market windows, but they’re considered high-risk investments that require professional expertise and should only be purchased with “gambling currency” you can afford to lose. The data shows that even top-tier mining companies have underperformed physical gold by 6.5x since 1971, making physical metals the safer long-term play for most investors. 

What is share dilution in mining stocks? 

Share dilution occurs when mining companies create and sell new shares through private placements to raise capital, which reduces the ownership percentage and value of existing shareholders. Unlike buying stocks on an exchange (where money flows between traders), private placements direct investment to the company but simultaneously dilute everyone who already owns shares—making mining companies what Mike Maloney calls “the greatest inflators on Earth, even more so than the Federal Reserve.” 

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