Markets are crapping out.. the 30 year Bond Bull run looks to be over (Sinclair said this was the key to $1650 and higher Gold).. real estate is dead... Europeans are in a panic- everything is going down.

The average investor has no where to go, no where to run, no where to hide. Except they notice this one obscure investment going up... its the only green item they see on the market summary board. That is Gold.

When do gold mining companies make money? When everything is going up in price?

No.

Gold miners make money when the "Real" price of gold is going up. Gold divided by commodities. Here's a chart of Gold divided by the Commodities Index.

http://stockcharts.com/h-sc/ui?s=$GOLD:$CCI&p=D&st=1990-01-01

When the real price goes up, Gold miners make a Crap load of money.

The large cap miners are the first to benefit. Their stock prices start to go up as they report quarter after quarter of record profits. Higher stock prices = higher market cap = ability to issues to more shares and buy things with their inflated share prices.

Gee, what is there to buy? Oh look, the juniors haven't moved at all. If Yamana goes back to $19/share, that will add about $7B to their market cap. That's enough to buy almost 1 Tyhee every day for an entire year (assume 245 trading days a year). But there are a dozen other Yamana sized gold miners and I suspect Yamana is going to take out those previous highs. Just do the math. It's a no brainer.

So in a way, we should want everything to crap out and move lower. The cheaper the base metals and fuel, the more profitable miners will be. Otherwise if the general markets stay up, the average Joe investor has no incentive to seek other investments.