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

Is the Economy Getting Better? Oil Prices Say No, Gold Says Maybe

Monday, November 26th, 2012
By for Profit Confidential

Economy Getting BetterOne 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.

Barrick Gold Corp Chart

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 gold isn’t advancing, it’s highly likely that the stock won’t either.

  • Profitable Options Trading Made Simple...

    "I'm offering you the easy, shortened version of a $17,000 Harvard-type options trading program that could generate you tens of thousands of dollars a month for as long as you want." ~ George Leong, B.Comm.

    Full story here.

This is the reality for gold stock investors. You can argue that gold prices are strong and certainly stable, and this stability should be met with solid earnings growth. (See “Look at These Big Capital Gains in Gold and Silver Stocks.”) But the stock market performance of many gold stocks has only been mediocre, and the selection of the best gold mining companies is very small.

Gold is an important component for any stock market portfolio. What gold needs to accelerate in price is a catalyst, and there isn’t one right now. A large drop in the U.S. dollar or a major acceleration in the Chinese economy would be possible catalysts. I’m bullish on gold prices and some gold stocks going into 2013. So far, however, getting spot gold over $1,750 an ounce has proved to be difficult.

VN:F [1.9.22_1171]
Rating: 0.0/10 (0 votes cast)
VN:F [1.9.22_1171]
Rating: 0 (from 0 votes)
  • Bruce Miller

    We used to say: " As goes GM, so goes the nation". You know where that got us don't you? Fact is: America is over-drawn around the world. Remedy: Belt tightening from the bottom up as far as possible. Result: a stalling depression then full nightmare depression a resetting of American values taking a decade, and the final admission that the Chinese version of communism served it's people better than barracuda Capitalists did in America, as we beg for Chinese Thorium reactors to burn the nuclear waste contaminating our country.
    America is long passed the magical "Tipping Point" sells few domestic cars even locally, hardly produces steel, only produces corn in abundance, and spends so much warring on behalf of others as to be hated world round. Expect our largest debtor to be served well in the South China Seas, even as well as the Saudis were served in Iraq, and Israel is to be served in Iran.

    “When a government is dependent upon bankers for money, they and not the leaders of the government control the situation, since the hand that gives is above the hand that takes. Money has no motherland; financiers are without patriotism and without decency; their sole object is gain.”
    ― Napoleon Bonaparte

    "A politician is a fellow who will lay down your life for his country." – Tex
    Guinan

    “How can a country have a world empire when it can’t finance its domestic budget? It’s not possible.” — Paul Craig Roberts

    “Democracy is four wolves and a lamb voting on what to have for lunch.” ― Ambrose Bierce

This is an entirely free service. No credit card required.

We hate spam as much as you do.
Check out our privacy policy.

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

The Great Crash of 2014

A stock market crash bigger than what happened in 2008 and early 2009 is headed our way.

In fact, we are predicting this crash will be even more devastating than the 1929 crash…

…the ramifications of which will hit the economy and Americans deeper than anything we’ve ever seen.

Our 27-year-old research firm feels so strongly about this, we’ve just produced a video to warn investors called, “The Great Crash of 2014.”

In case you are not familiar with our research work on the stock market:

In late 2001, in the aftermath of 9/11, we told our clients to buy small-cap stocks. They rose about 100% after we made that call.

We were one of the first major advisors to turn bullish on gold.

Throughout 2002, we urged our readers to buy gold stocks; many of which doubled and even tripled in price.

In November of 2007, we started begging our customers to get out of the stock market. Shortly afterwards, it was widely recognized that October 2007 was the top for stocks.

We correctly predicted the crash in the stock market of 2008 and early 2009.

And in March of 2009, we started telling our readers to jump into small caps. The Russell 2000 gained about 175% from when we made that call in 2009 to today.

Many investors will find our next prediction hard to believe until they see all the proof we have to back it up.

Even if you don’t own stocks, what’s about to happen will affect you!

I urge you to be among the first to get our next major prediction.
See it here now in this just-released alarming video.