Lombardi: Stock Market Commentary & Forecasts, Financial & Economic Analysis Since 1986

Everything Gold Is Turning Into Some Serious Green

Friday, September 9th, 2011
By for Profit Confidential

Gold stocks are performing tremendously well right now. The big producers just hit new, all-time record highs on the stock market. Some junior mining companies' share prices are creating outstanding wealth for shareholders. It begs the question, however: what are the best stocks to consider right now as a new investor? You can just tell that the stock market is completely unsure of itself. The price swings up and down are telling. Investors want to be buyers of equities and they have the money to do so. What’s missing is a positive catalyst to keep the trend going for more than a day. The market is trading on economic data that are decent one day and poor the other. It’s one big trading range around 1,200 on the S&P.

Gold stocks are performing tremendously well right now. The big producers like Barrick Gold Corporation (NYSE/ABX) and Newmont Mining Corporation (NYSE/NEM) just hit new, all-time record highs on the stock market. And, it’s not just the big producers that are making money for shareholders; junior mining companies are experiencing tremendous share price appreciation as well.

Small, but growing producers like New Gold Inc. (AMEX/NGD), Richmont Mines Inc. (AMEX/RIC) and Avion Gold Corporation (TSX/AVR) are just a few examples of junior mining companies whose share prices are creating outstanding wealth for shareholders.

It begs the question, however: what are the best stocks to consider right now as a new investor? My answer is almost nothing. Gold stocks are doing exceptionally well and the right ones are making money for shareholders hand over fist. But, I know from experience that it’s difficult for new investors to buy a stock that’s already gone up. If there were a broad-based correction in the spot price of gold and gold shares, then I’d say buy gold stocks across the board. Whether this correction will happen (which I think would be healthy for the long-run price trend in gold) is indeterminable.

The price of gold should continue to be strong for the rest of the year, so buying high and trying to sell higher would be a valid strategy. Currently, I see value in other resource plays, like oil and gas. Speculators wanting a position in gold (or silver) could easily consider an exchange-traded fund (ETF) that mimics the spot price of the underlying commodity. You can even choose from ETFs that have some leverage to precious metal prices.

In the large-cap space, higher-dividend-paying stocks are the most attractive. For equity speculators, it would seem that the resource-related play still holds the most promise. I don’t see a lot of reasons for investors to be making any bold moves in this market. Sentiment is so choppy that the main indices can turn on a dime.

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Now is a time for gold investors to be reaping from their exposure to this sector. The trend isn’t over in gold, but it certainly is due for a correction.

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Mitchell Clark - Equity Markets Specialist, Financial AdvisorMitchell Clark, B. Comm. is a Senior Editor at Lombardi Financial specializing in large- and micro-cap stocks. He’s the editor of a variety of popular Lombardi Financial newsletters, such as Income for Life and Micro-Cap Reporter. Mitchell, who has been with Lombardi Financial for 17 years, won the Jack Madden Prize in economic history and is a long-time student of equity markets. Prior to joining Lombardi, Mitchell was as a stock broker for a large investment bank. Add Mitchell Clark to your Google+ circles

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