Archive for the ‘gold stocks’ Category
So much change is in the air: the stock market breakout, declining commodity prices, and a world awash in cash.
Thinking about gold, it is just a piece of soft rock. But it’s a rock with a special connotation and with unique properties. It did a fantastic job helping the space shuttle, and a lot of people think it looks pretty good.
The first gold jewelry-makers must have been jumping for joy when they found a shiny rock they could shape without breaking. I read that approximately just 10% of gold production is used in industry; the rest is for jewelry and physical investment.
Because people throughout the centuries attributed value to gold, the soft rock has some worth.
Today, gold prices are determined by derivative traders, central banks, and what barterers believe it to be worth. This is not a group of market-makers that inspires confidence.
I certainly see a role for a little gold as part of an overall portfolio. It has always been a diversification, fear, and inflation-related hedging tool.
With lower gold prices, gold miners are struggling on the stock market. Even the best-quality, fastest-growing gold miners can’t get their stocks to move.
This is the inherent difficulty with resource stocks, and it will never change.
Predicting gold prices is a crapshoot. For the most part, it seems to me that gold prices just trade off their near-term directional momentum, save for a shock. Figures on the supply and demand of the commodity seem to play a lesser role in … Read More
The amount of bearish sentiment towards gold prices these days on the part of investors is not surprising to me. Investors often work in herds, moving to “hot” sectors from “weak” sectors very quickly. But, as I have said all along, the “gold play” is a long-term one, not a speculative one.
Economics 101: if demand for an asset or item increases, prices rise. If supply of an asset or item increases above demand, prices fall.
Gold prices follow the same historical economic principle. If we see demand for gold increasing, we can assume prices will also rise, because the supply of gold is limited.
At present, and as I have said in these pages many times before, there is fundamental demand for gold. Central banks and investors alike are hunting for and buying physical gold.
To give you some idea on the strength of gold buying, according to the Census and Statistics Department of the Hong Kong government, gold imports by China from Hong Kong doubled in the month of November 2012 from the prior month. China bought 90.764 metric tons of gold in November compared to only 47.478 metric tons in October of 2012. (Source: Bloomberg, January 8, 2013). Compared to the first 11 months of 2011, for the first 11 months in 2012, Chinese imports for gold also doubled.
Now let’s look at gold demand by the central banks. To say the least, they are running towards gold like never before. Why? Because their printing presses are in overdrive mode. Central banks need to have some physical gold to back their ever-increasing supply of paper … Read More
More hard reality is coming to the stock market and those commodities that will benefit from the headwinds coming our way. The spot price of gold has been going up on a weaker U.S. dollar, which has been going down because of worries regarding the global economy. Gold looks good here, and $2,000 an ounce by early 2013 is a real possibility.
A lot of gold stocks recently hit a wall, not just because of stalling of the spot price of gold, but because of their valuations. The perfect example of this is industry benchmark Yamana Gold Inc. (NYSE/AUY), which has followed spot gold in its turnaround since August. Since then, this well-managed gold producer is up five full points and currently boasts a price-to-earnings (P/E) ratio of approximately 40. Wall Street analysts recently increased their earnings expectations for the company in 2013, but what this stock needs now is a rising spot price in order to break out. Yamana Gold’s stock chart is featured below:
Chart courtesy of www.StockCharts.com
This is the big thing with gold stocks; no matter how good the story is or how much an earnings report beats the Street, gold stocks don’t really go up unless the spot price of gold is doing so. It’s a reality of precious metal investing; it’s a reality of most commodity-related securities.
Balanced equity portfolios should already have some exposure to gold, either through individual gold stocks, a fund, or an exchange-traded fund (ETF). No matter what happens to the U.S. economy going forward, the fundamentals for gold support a rising spot price environment. Sovereign debt, a weaker … Read More
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