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Gold bulls' reason to look favorably on precious-metal investments today: They're cheaper. This is especially true regarding closed-end funds, whose premiums about net assets have evaporated.

Now here's an argument for the bears from Citigroup's Jon H. Bergtheil and colleagues. The analysts have been arguing for a few months now that it's time to get out of precious metals mining stocks and into industrial metals.

From Bergtheil's note, and I can't immediately reproduce the charts and figures, apologies for that:

Long-Cycle Metals Have Peaked

The problem with gold and silver is that they are very 'long cycle' metals and there is a significant risk that we have recently seen the peak of such a long cycle. If they ARE in the process of peaking now, then history suggests that they could go into hibernation for a very long time. Figure 1 below tracks the seventies bull market in silver and its eighties and nineties bear market. If history were to repeat itself, then we should not look for silver to exceed $40/oz for the next twenty years, if indeed it is peaking at the moment.

If silver is currently peaking, then Figure 2 below suggests that it may have a long way to go down in terms of dollars per ounce as well as in the matter of the extended time frame mentioned above. Of course, it may not be peaking, but our view is that we would need a global systemic risk level HIGHER than 2011 and 2012 to warrant an argument that silver's bull market is not over. Alternatively, if these general systemic risks (i.e. across all currencies) are not to be silver's driver, then we need the dollar to collapse in order for silver not to be peaking now. However, since the days of 2004 and 2005, when the Euro was king and the dollar was supposedly 'finished' as the world's reserve currency, the dollar's status relative to the Euro has improved enormously with each new revelation of the cracks in the multi-country Euro mechanism. Indeed, with fracking etc in the USA leading that country towards energy independence in the near future, the entire long-term bearish argument on the dollar relative to the Euro may have changed, in our view.

Our 'fundamental' argument therefore is that the key drivers that took silver above $40/oz are weakening, while the key drivers for industrial metals are slowly (albeit painfully slowly) improving.

The problem with a view that gold and silver may be peaking is that investors have been excusing the superior PE and P/NPV ratings on gold and silver stocks for a long time on the basis that the $30-$40/oz range is the 'new normal' for silver, or indeed that silver may be on its way to exceed $40/oz.

A fall in gold and silver therefore not only threatens EPS but threatens the excessive valuation rating (some gold and silver stocks on double the PE of diversified miners) that the market has been willing to grant this sector. If gold and silver are going into a 20-year hibernation, then those valuation ratings are well off reasonable levels.

The market tolerates excessive precious metals equities valuations during a flight away from risk and into 'insurance metals', but it is doubtful that the market will tolerate the gap during any future 'Risk-On' phase in the global equity market. When people were rioting on the streets of Athens, the appetite for gold, silver and for Hochschild was very high, but the entry price to Hochschild was also very high.

If 2013 does progress as a year when we see no more riots on the streets and see ongoing economic recovery (even if modest), then it is our view that the market will seek increased operational gearing, exposure to industrial commodities rather than 'insurance metals', and will be unwilling to pay a premium for gold/silver companies over diversified mining groups. ...

It is difficult not to come to the conclusion that the market's opinion on the appropriate P/NPV value is impacted by the trend in metal prices. The P/NPV ratio tends to fall when metal prices are falling and rise when metal prices are rising. If the gold and silver prices are peaking, therefore, this would impact BOTH the EPS trends in the sector as well as the market's opinion on what the appropriate P/NPV ratio is. It is our view that, because of this historic relationship, the market will no longer be willing to tolerate a P/NPV ratio above 1.6x for gold and silver equities, as it has done for most of the past two years.

We accept that gold and silver companies have always traded at valuation premiums to diversified miners and base metal companies. We do, however, find these more acceptable when gold and silver prices are trading 20% above their 10-year average. When gold and silver prices look very vulnerable to mean reversion, these types of valuations on precious metal shares can be called into question.

Market Vectors Gold Miners (GDX) is down 2.7% to $38.31 and Market Vectors Junior Gold Miners ETF (GDXJ) is down 3.4% to $16.07. SPDR Gold Trust (GLD) is down 1.4% at $153.17 and the iShares Silver Trust (SLV) is down 2.4% at $27.76.