In 2002, Profit Confidential began warning readers to get back into gold-related investments, specifically gold stocks. “I’ve been pushing gold bullion and gold shares for over a year now. Back in January 2002, I personally started buying gold shares,” Michael Lombardi said on December 13, 2002.
This gold stocks guidance and analysis proved to be extremely timely. Gold bullion was trading at under $300.00 an ounce when Michael first started recommending gold-related investments. Many gold stocks recommended in Michael’s advisories gained in excess of 100%!
Back in 2002, Profit Confidential started offering gold stocks analysis to our readers, and continues to do so today. And, we have been recognized as one of the first investment letters advising its audience to jump into gold stocks, very early on in the gold bull market. The analysis we provided resulted in many gold stocks rising 100% or more in very short periods of time.
Profit Confidential has also been ahead of the investing curve by successfully advising readers to dump certain stocks, and to put the proceeds into gold-related stocks.
In the June 2, 2005 issue of Profit Confidential, Michael noted, “Most investors in Google, surprisingly, are retail investors. And, that’s why the stock can go higher—because only 20% of the stock is owned by institutions. If the institutions jump in and buy Google, the stocks will certainly move higher.”
Michael recommended Google as a buy when it was trading at $288.00 per share. On November 5, 2007, when Google reached $700.00 per share, he advised readers to sell their Google stock and put the proceeds into gold-related investments. Coincidently, gold bullion was also trading at around $700.00 per ounce. Michael’s message was to trade each $700.00 share of Google into $700.00 of gold-related stocks because he saw gold as a much better investment.
He was right. Since then, Google has struggled to break through the $700.00 per share level. Gold, on the other hand, touched $1,923 per ounce on September 6, and continues to trade above $1,700 per ounce.
And, gold stocks are expected to continue to shine. Gold has experienced 12 consecutive years of sequential growth. The recent weakness in gold bullion prices (more like a correction in an ongoing bull market) is a tremendous opportunity for smart investors.
The overarching driver of the price of gold will continue to be linked to the global financial crisis, and ongoing tensions in the Middle East. As a result, gold is expected to rise every quarter next year and average $1,925 an ounce in the final three months. Some analysts believe gold will rise above $2,200 an ounce. (Source: Larkin, N., and Roy, D., “Soros bets big on gold as prices expected to hit record highs,” Investing November 20, 2012.)
Today, you can regularly find our economic analysis of gold and gold stocks in Profit Confidential. Each time gold prices moved higher, we told our readers to buy more gold-related investments. See what we have to say about gold’s future rally in Profit Confidential.
In fact, it has been an awful few days for gold as prices plummeted, failing to hold $1,500 an ounce.
Prices dove right through support at $1,400 to $1,385.62 on Monday—the lowest level since 2011.
The shiny yellow ore is in a bear market. Down 27% from its magical peak of $1,920 in September 2011, it has been nothing but turmoil for investors in the yellow metal.
As I said in a recent commentary, I have lost confidence in the metal as a safe haven investment at this point. I’m not even sure I would enter on the current weakness.
The price chart says “sell.” Follow the trend, and you may be able to squeeze out some profits on an oversold bounce trade; but extending the trend forward, things don’t look good for gold.
Now we will need to see if the precious metal can hold $1,400.
As we move lower, there are now concerns of a meltdown in the gold sector, especially if prices continue to trend lower toward the $1,200 level.
Goldman Sachs, which recently turned bearish and advised shorting the metal, is fearful of gold prices dropping to the $1,200-an-ounce level—as this level also represents the cash cost to produce gold at this point. (Source; Cosgrave, J., “The Scary Number for Gold Investors: $1200,” CNBC, April 15, 2013.)
The $1,200-an-ounce cost of production is clearly an issue, especially for the smaller mining companies that are not as cost-effective or able to survive a cash crunch, compared to the mid- to large-tier producers, like Newmont Mining Corporation (NYSE/NEM). (Read … Read More
There is a serious problem in the gold mining business these days, and it’s not because of the stagnant spot price. Costs are going up industry-wide, and it is making buying gold stocks much less attractive.
Gold prices have been in consolidation for about a year and a half, and I feel they should experience an upward breakout later this year. But cash costs per ounce are going up, and I would say that the majority of gold producers are reporting this in their quarterly earnings reports.
It begs the question: should you buy gold stocks right now? My answer is no. I’d rather see you just buy gold. Why take the investment risk of betting on the spot price of gold, a company’s ability to meet production targets, and the industry-wide trend of higher costs? Right now, it’s not worth it. You might as well just speculate on gold prices, not gold stocks. That’s enough investment risk.
Barrick Gold Corporation (NYSE/ABX) is one of several large-cap gold stocks that are having a tough time on the stock market these days. Gold stocks have corrected much more than the actual spot price of gold due to rising costs. Earnings estimates for Barrick have been revised downward for upcoming quarters; and while you might argue that $30.00 a share is a floor for the stock, why bother taking the risk? Barrick’s stock chart is featured below:
Chart courtesy of www.StockCharts.com
There are a lot of stocks that are doing well in this market. Because there is no uniformity to business conditions in both the U.S. economy and the rest of the world, I’m making a conscious effort to attribute less weight to the major stock market indices and more to individual companies and their specific business conditions. I hate to say it, but the main stock market indices can be quite misleading, and one company can skew the index (like Apple Inc. [NASDAQ/AAPL] when it was at its high).
The way I look at the stock market and the economy today is with very low expectations. If U.S. gross domestic product (GDP) can grow faster than the rate of inflation, then that’s a good accomplishment. I hope the Federal Reserve is right with its prediction of 2.5% in U.S. GDP growth in 2012 and 3.5% in 2013. Of course, these forecasts change all the time, so it doesn’t mean much.
So, while the S&P 500 index is trading around its five-year high, plenty of stocks are doing much better than the index. (See “Earnings Picture Starts off Bright with Oracle.”) 3M Company (NYSE/MMM) just hit an all-time record high on the stock market. This stock has had a few down years, but it has basically been going straight upward since 1982. Consider Johnson & Johnson (NYSE/JNJ). This position just hit an all-time high on the stock market. It was kind of slow over the last 12 years, only doubling not including dividends. The stock is up seven-fold since 1994, not including dividends.
Then there’s my favorite, Colgate-Palmolive Co. … Read More
One of the best barometers on the state of the stock market and investor sentiment is actually the price of oil. Obviously, low oil prices are helpful to consumers, but from a financial market viewpoint, they express the opinion from speculators that economic activity is challenged. On the other hand, it’s arguable that gold prices represent fear in the global economy. But as a commodity, gold can’t seem to accelerate in this market; it’s just holding around $1,730 an ounce.
One precious metal that is slowly ticking higher is silver. It’s doing a bit better than gold lately, and silver-watchers argue that the commodity is due to catch up to the price of gold, as it’s been laggard over the last few years.
Even though gold prices are holding at their current levels, a lot of gold miners have done terribly on the stock market this year, especially in the large-cap space. You’d think that the stability in gold prices would be helpful, but one material trend among gold miners this year is that costs have gone way up. From start to finish, it costs a lot of money to produce a bar of gold. Barrick Gold Corporation (NYSE/ABX) illustrates this poor stock market performance. This stock has been trending lower for the last two years.
Chart courtesy of www.StockCharts.com
There is an underlying trend in the stock market as it relates to precious metals. Producing mining companies don’t really advance on the stock market unless the underlying spot price of the commodity is doing so. You can have the best business growing its revenues and earnings, but if spot … 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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