They say people shrink as age increases. What I didn't realise was that it also applies to gold and silver stock portfolios. Having seen my Western Silver shares swallowed up by Glamis Gold earlier this year, I now see another member of my portfolio, Novagold, ripe for disappearing from the gold mining world.

Barrick want to pay about $1.3 billion cash for them, lock, stock and barrel. Perhaps I should be grateful I am not being offered heavily hedged stocks in Barrick in return but the point of this piece is not to debate the rights or wrongs of Barrick's move. Well, actually, they are quite within their rights to indulge in some bottom fishing while gold stocks are cheap. After all, that is what individual investors do and the same individual Novagold investors should hold out for a better deal.

With the Western Silver takeover, I got increased gold and copper exposure rather than silver exposure (investors got additional shares in a copper exploration company WRN.TO). That's okay if you think gold and copper will ultimately outperform silver, but that is not my view and even if that was not the case, companies perceived as silver producers are not the low hanging fruit we think they are. In other words, a lot of them are more exposed to gold and base metals than we think due to the simple fact that they don't just produce silver.

With Novagold, I get to exchange gold exposure for fiat money exposure. Needless to say, I will not be holding that paper for long.

This brings me to the main point. Who is next in our gold stock portfolios? What company we originally bought and intended as a buy and hold will cease to be by this time next year? Will that company we hoped would be a ten fold winner just become a stock that goes too quickly for a mere 30% premium over a pre-blow off price?

Unlike the real universe, the gold stock universe is shrinking. To extend the analogy to the world of fish, barracuda top producers buy up mid-tier producers and further down the food chain guppy junior explorers get eaten up by other fish just big enough to swallow them without getting a bad case of cash flow indigestion. Now, we know what happens when the little tiddlers at the bottom of the chain dry up, the whole chain seizes up and the gold ecosystem goes into collapse. Why should it collapse? Won't more small start ups just appear foraging at the bottom for that big gold find?

Well, actually, that increasingly does not appear to be the case as good gold deposits become harder to find. And the harder gold is to find, the less likely it is that geologists and financiers will get together, even if gold is at $2000. Peak Gold has arrived as I said in a previous article and that means gold above ground becomes increasingly more prized than gold under ground - unless you hold that winning company the sharks have missed.

So, going back to that portfolio, you may say I should just replace outgoing Novagold with another comparable company and no shrinkage will occur. I may well do that. However, my concern is that this issue is not just about shrinkage of quantity but shrinkage of quality as well and with the HUI barely leveraging the price of gold just now, one not only needs to be more critical of what is on offer but also who will survive the predators of takeovers and nationalization to safely swim out into the open seas of leveraged gold profits.

Roland Watson writes the investment newsletter The New Era Investor that can be purchased for an annual subscription of $99. To view a sample copy of the newsletter, please go to http://www.newerainvestor.com/ and click on the "View Sample Issue Here" link to the right. Comments are invited by emailing the author at newerainvestor@yahoo.co.uk.