By Kishori Krishnan
Is it time to buy? Gold’s latest move above the $1,000 mark has stoked the long-standing debate between mining stock aficionados and bullion fans - what exactly is a better investment - gold bullion or gold mining shares?

Going by a year-to-date basis, bullion’s performance lags that of mining shares in 2009, despite the recent breakout. Gold shares have gained 15.5 per cent versus the Market Vectors Gold Miners ETF’s (NYSE Arca: GDX) - a portfolio of nearly three dozen global mining companies - 41.5 per cent appreciation in dollar terms.

Is that really surprising? After all, commodity stocks have led physicals this year. Take, for instance, the outperformance of the Market Vectors RVE Hard Assets Producers ETF (NYSE Arca: HAP) over the GreenHaven Continuous Commodity Index Fund (NYSE Arca: GCC). The HAP portfolio, comprising global equities, is up 35.1 per cent this year, while the futures-tracking GCC fund has risen just 10.3 per cent.

Like other commodity stocks, the strength of the gold mining shares depends, in part, upon the health of the broader equity market. A buoyant environment for stocks is wind at the back of gold shares. That’s pretty much reflected in the price ratio of GLD shares to those of GDX.

Collectively, mining shares produced about half the annual growth of gold bullion over the past three years. Still, certain issues such as Agnico-Eagle, Kinross Gold and IAMGOLD Corp generated outsized gains and, accordingly, earned the highest reward-to-risk ratios.

As a class, mining shares are clearly more volatile than gold. Sometimes, their higher risk yields compensatory rewards and sometimes not. If you are in for an additional layer of risk, then be prepared for a handsome pay-off.

The choice is yours to make.

Breakout
Breakout attempts are always dicey, always a little scary and they rarely launch higher without a significant retest of the breakout at least once shortly after the event. Trouble is, speaking on a very short-term level, that breakouts above important, long-established, historic resistance fail about as often as or even more often than they succeed.

Even more trouble is that bearish technical interests love failed breakouts even more than bulls love the originals

So where does one go?

Courtesy: www.goldinvestingnews.com