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

Posts Tagged ‘mining stocks’

Business Stalls for Equipment Manufacturers; Outlook for Precious Metal Companies Flat

By for Profit Confidential

Business Stalls for Equipment ManufacturersOne specific stock market sector that continues to be very challenging is the precious metals mining area. A combination of events has hit the precious metals producers: lower spot prices and rising costs being two of the main factors. It’s been the perfect storm for gold mining stocks, and the trend isn’t over yet.

And with reduced operating margins comes the big squeeze in capital expenditures. This is no more evident than in the well-known mining equipment company Joy Global Inc. (JOY), which has been under pressure on the stock market for the entire year.

Joy Global is a well-known manufacturer of mining equipment out of Milwaukee, Wisconsin. It’s been around since 1884, and like precious metals themselves, the company’s share price is volatile.

In the company’s latest earnings report for its third fiscal quarter of 2013 (ended July 26), total bookings for underground mining machinery dropped a staggering 42.6% to $361.2 million from $629.2 million in the same quarter last year.

The company reported original equipment orders fell 68%, with declines in all regions except China. Aftermarket orders fell 27%, with declines in all regions except North America. Foreign exchange hurt orders for underground mining machinery, which dropped by $71.0 million, according to the company.

Total revenues in Joy Global’s latest quarter fell five percent to $1.3 billion. As noted by the company’s management team, prices for industrial metals and bulk commodities have dropped 20% to 40% over the last 18 months.

Seaborne coal prices have fallen 17% since the beginning of the year, and China’s domestic coal prices have dropped almost 20%. With this backdrop, Joy Global says … Read More

Why Silver Prices Will Double from Here

By for Profit Confidential

U.S. economyAs gold bullion prices declined in the period from April to June of this year, so did silver prices. And just like gold bullion, the bullish case for the white metal’s prices continues to build.

Demand for the white precious metal is not just robust; it is rising. The chart below compares sales of silver coins at the U.S. Mint in the months of January to July of 2012 and 2013.

The demand for the precious metal is strong, having risen by 50% in the first seven months of this year compared to the same period a year ago.

Last week, Chris Carkner, the managing director of sales for bullion, refinery, and exchange-traded products at the Royal Canadian Mint, said, “Year-to-date, after the second quarter, we’ve had record (demand) volume for silver Maple Leafs, the greatest we’ve had in the over 25 years that we’ve produced them…” (Source: “INTERVIEW: Gold, Silver Product Demand Is ‘Very Strong:’ Royal Canadian Mint,” Kitco, August 14, 2013.)

chart

Data Source: U.S. Mint web site, last accessed August 23, 2013

Looking at the technical picture, the chart below clearly shows the bottom in silver prices and the new upward-moving price trend.

Silver-Spot Price Chart

Chart courtesy of www.StockCharts.com

Yes, prices for the white precious metal are down for the year, but after breaking below $19.00 an ounce, they quickly recovered and found support, as shown in the chart above. Unlike gold, silver prices tested the same support level ($19.00 an ounce) on several occasions, and they always bounced above that level whenever it was tested.

Have silver prices hit a bottom? Price manipulation aside, fundamental demand and technical analysis … Read More

Best Turnaround Trade in Years May Be on the Horizon

By for Profit Confidential

Best Turnaround Trade in Years MayThe spot price of oil keeps taking it on the chin, while gasoline prices remain lofty, padding the pockets of the big integrated oil companies even more. What a great business to be in. Which is why, of course, a stock market portfolio should have some exposure to large integrated oil and gas companies.

U.S. domestic oil production continues to experience a renaissance, but Bakken oil stocks aren’t going up with oil prices stuck in the low $90.00s.

I’m still amazed at the strength of the major integrated oil and gas companies on the stock market. Here we have a glut of natural gas and declining oil prices; yet on the stock market, Chevron Corporation (NYSE/CVX) is trading at an all-time record high. Frankly, I like Chevron, and if the stock is at a record high with these fundamentals, just imagine where it will go when the cycle changes.

Speaking of which, a great trade may be coming down the pipeline, and it could be one of those rare buy low/sell high opportunities. The trade is in natural gas. It isn’t going to happen tomorrow, but natural gas prices are going to turn; and when they do, there will be a lot of organic leverage available in the right stocks. I’d be scoping the stock market now for candidates.

One group of stocks that are down right now and worth looking into is the small-cap oil and gas services stocks. Large-cap oil and gas services are doing better on the stock market, but there’s more growth available from Bakken oil and gas services than from in the Gulf of … Read More

Why a Buying Opportunity May Be Near for Gold

By for Profit Confidential

Buying Opportunity May Be Near for Gold Gold is currently looking somewhat dull on the chart, losing some of its luster following the bearish move of the spot price to below $1,600/ounce on February 15. Gold has since rallied back to above $1,600, but it continues to show extremely weak relative strength.

We are hearing more whispers predicting prices could falter more; but while I’m neutral at this point, the ability of the yellow metal to bounce back from below $1,600 was a positive sign.

The jury is still out on the potential of gold. The situation in the eurozone remains fragile, but there have been some signs of improving sentiment, which is what traders want to see.

In early January, Marc Faber, also known as “Dr. Doom,” in an interview on CNBC suggested gold could correct 10% or more to as low as $1,550 and $1,600. (Source: Belvedere, M.J., “‘Dr. Doom’ Faber Sees Possible 10% Gold Correction,” CNBC, January 8, 2012, last accessed February 20, 2013.)

In my view, gold continues to be a place to park some capital. For this reason, I feel the metal will likely continue to hold above $1,500 after 11 consecutive up years.

For the investor, accumulating gold stocks or positions on further weakness below $1,600 makes sense.

The chart below shows sideways trading with major support around $1,550 and upper resistance at $1,800, as indicated by the horizontal blue lines. Within this trading band, there’s a downward trading channel as indicated by the downward-sloping blue lines. We saw a similar situation in February to May 2012, prior to a rally back to the upper-band resistance. I’m not saying this will … Read More

Realities of the New Housing Market; Institutions Buy and Rent Homes

By for Profit Confidential

Realities of the New Housing MarketHere’s the bottom line on the U.S. housing market and why it’s not really a recovery we can bank on:

The most important part of the U.S. housing market—first-time homebuyers—is missing from the action! We need first-time homebuyers in the market to see real growth in the U.S. housing market. After all, they are the ones who buy the fridges, stoves, dishwashers, and other goods that help increase consumer spending in the U.S. economy.

In December of 2012, out of all the existing home sales in the U.S. housing market, first-time homebuyers accounted for only 30%! This number was unchanged from November and more than three percent lower compared to December 2011. (Source: National Association of Realtors web site, last accessed January 22, 2013.)

Just look at sales of appliances…

According to the Association of Home Appliances Manufacturers (AHAM), as the housing market “rebounded” in the U.S. economy, the shipments of appliances to stores and warehouses actually declined to 60.7 million units in 2012, compared to 60.8 million units in 2011. (Source: Wall Street Journal, January 15, 2013.) If the housing market is rebounding, why are appliance sales declining?

The Association notes that shipments of six core appliances—washers, dryers, dishwashers, refrigerators, freezers and ovens—declined 2.3% in 2012. For December alone, the shipments dropped 4.1% compared to December of 2011.

To the mainstream media calling this a “recovery” in the U.S. housing market: you’re missing one big point…

Home prices are slowly rising, and supply is slowly decreasing in the U.S. economy, because institutions and individual investors are running to buy residential properties.

For investors, buying up single-family homes … Read More

Gold Mining Shares Best Opportunity of 2013?

By for Profit Confidential

Words of wisdom from Robert Appel, BA, BBL, LLB, our in-house gold bullion bug and “money watcher:”

“The markets seem quiet and controlled, but they are anything but that.

Among the more astute commentators (and we like to believe that this advisory enjoys the privilege of being in that category) it has been noticed that, just in the last few days, Japan’s declaration of a “currency war” (i.e., that it will print and print and print until both the yen weakens and higher “targeted” inflation is seen) has been matched word-for-word by President Obama; in his inaugural statements, Obama signaled his intent to overcome any Republican resistance, and (similar to Japan’s plan) “print” the U.S. out of its current problems. Under normal circumstances, these statements would have propelled the price of gold bullion higher.

Even in these extraordinary times, these statements have stunned politicians and academics around the world. Especially since they come at a time when Europe is still very much in the quagmire it was in last year at this point (simply getting less press, that’s all); and China is struggling to overcome the inevitable problems of too-rapid growth without a seatbelt (results which include, for example, cities where the residents are actually inhaling chunks of pollution that collect in their mouths on the way to work!).

Some writers are saying that we have now officially entered an era of chaos where gold bullion prices should boom. We agree. In the same vein, you might be astonished to see that in a world where unlimited money printing has suddenly been given the green light, both gold and the … Read More

Mining for Riches with Junior Miners

By for Profit Confidential

Mining for Riches with Junior MinersGold and silver are currently taking a breather on the charts, but if the global risk holds, I wouldn’t be surprised to see a rally in the precious metals this year.

I can see gold breaking to $1,800 an ounce, something that nearly materialized on October 5, 2012, when the price of cash gold traded at $1,795.78 prior to slipping. In fact, the previous time the precious metal was trading above $1,800 was on November 8, 2011. We could see a move above, given the eurozone mess, U.S. debt and fiscal cliff, and the mixed results in China.

Silver is holding at around $30.00 an ounce, but I’m not as bullish on the white metal, as the price is largely driven by the direction of the global economy.

I continue to like gold going forward, given the financial crisis in the eurozone; trust me, it is not going to get better anytime soon…it could even take years. Moreover, with a recession holding in the eurozone, the crisis could deepen and impact the global economy.

Across the Pacific, there are some encouraging signs in China; but prolonged weakness in the eurozone and Europe will negatively impact China along with the other Asian countries, like South Korea, Japan, and the smaller emerging Asian markets.

For those of you who took my advice to hold on and accumulate gold on weakness down to $1,600, it has been a nice ride. In my view, major price weakness should be viewed as an opportunity to accumulate the yellow metal in 2013, unless $1,600 can’t hold.

I favor the metal plays and continue to see opportunities, … Read More

Junior Miners Offering Great Upside

By for Profit Confidential

Junior Miners Offering Great UpsideGold flew above the $1,700 level last Thursday to $1,712, marking 15 new highs over the past month but still well down from its 52-week high of $1,790 in February. The breakout around $1,625 is positive. There is some resistance at $1,750 and $1,600.

I continue to like gold going forward, given the massive financial distress and possible exit of Greece from the eurozone despite what the European Central Bank has said. And then there’s Spain and the other five eurozone countries that are currently in a recession. he eurozone may also be heading for a recession in the third quarter and Germany by year-end.

Any price weakness should be viewed as an opportunity to accumulate.

I favor precious metal plays and continue to see opportunities here, especially in mining companies and junior gold miners. You want to ignore the fluctuation in gold, silver, and copper prices and understand that these mining companies will continue to mine.

China and India continue to be the world’s top buyers of gold, and this is expected to continue. The Chinese have also been buying mining companies around the world in an effort to increase its reserves. This is a reason why I like some of the smaller mining companies, especially those with a massive reserve of proven metals in the ground, waiting to be developed and needing a cash-rich partner to get the ore out of the ground.

You can buy the major gold players such as Freeport-McMoRan Copper & Gold Inc. (NYSE/FCX), Barrick Gold Corporation (NYSE/ABX), and Newmont Mining Corporation (NYSE/NEM), but for the real big gains, you need to own some … Read More

Mining Stocks Getting Exactly What They Need

By for Profit Confidential

Mining Stocks Getting Exactly What They NeedGold and silver prices are rising, and this is exactly what mining stocks need. After a well-deserved correction in gold prices, gold stocks were hit pretty hard as institutional investors abandoned the sector. Just like the spot price, speculating in gold stocks isn’t for the weak-stomached; volatility is standard in precious metals. But with volatility comes the opportunity for greater returns—if you buy the right companies at the right time.

Silver prices are currently moving nicely high—much stronger than gold. Silver prices have lagged spot gold for quite a while now, and some of the best values that recently developed on the stock market are silver stocks. Everyone says silver prices have more room for advancement, but I’d still own both.

Gold and silver prices are going up in anticipation of a third round of quantitative easing (QE3), or some form of monetary policy, by the Federal Reserve. Most Wall Street investment banks are now predicting that spot gold will be well over $1,800 an ounce by the end of the year. With all the turmoil we’re going to have to deal with next year, owning some gold and silver will likely be a good bet. What’s required for gold and silver stocks to really advance is the return of institutional investors to the sector, which will happen if gold and silver prices keep ticking higher.

I want to repeat my view that there are actually very few attractive gold and silver mining companies on the stock market at this time. Costs have been rising substantially at many precious metals companies, and profitability at a lot of companies has been … Read More

Global Economy Warning from World’s Largest Miner

By for Profit Confidential

Global Economy Warning from World’s Largest MinerWhen it comes to getting a feeling of what’s happening in the global economy, starting with the basic commodity firms is a good first step. The global economy depends on mining stocks to extract valuable inputs, such as iron ore, that go into making things, such as steel. If the global economy starts to slow down, as it is now, less demand for the final product means lower prices that mining stocks can receive for the extracted materials.

BHP Billiton Ltd. (NYSE/BHP), one of the world’s largest mining stocks, announced that it is not approving any new projects until June of 2013. The company went on to include a delay of its massive $20.0-billion Olympic Dam mine in Australia. With a massive decrease in income to $5.5 billion for the first six months of 2012, ended June 30, as compared to $13.1 billion in the year-earlier period, the company and other mining stocks are feeling the pinch from a slowing global economy.

With China being a major buyer of raw materials that’s now slowing down rapidly, the future is not bright for mining stocks of basic commodities, at least not in the short term. The company cites costs that are continuing to rise and buyers are reducing the level of orders for iron ore, copper, coal, and nickel among other base materials.

BHP Billiton Ltd. Chart

Chart courtesy of www.StockCharts.com.

Investors are somewhat pleased with this news, as you can tell by the recent move up in the stock price. With the stock sitting near the 200-day moving average, one should be cautious, as that has been an area of resistance in the … Read More

Good Entry Point Coming Soon
to This Uranium Mining Stock

By for Profit Confidential

uranium investingWith the growth of the world population, the impact on the global environment increases as well. As more goods are being made, this in turn means more energy use. With sources like coal having a negative effect on the environment, uranium investing through mining stocks still appears to be a solid idea for the next decade.

China and India, among other emerging markets, are continuing to ramp up energy demand. This is where uranium investing comes into play. These nations need the energy and only through uranium investing can they keep up with their growing needs. While they do use traditional fossil fuels like coal, the amount of pollution in some parts of these countries is extremely large. Not to mention that nuclear is more efficient than coal. Emerging markets have extensive plans to grow their nuclear facilities, from which uranium investing and mining stocks should benefit.

The Japanese disaster hurt mining stocks for investors interested in uranium investing. Short-term moves can hurt total portfolio returns if they are only temporary. For those with a bullish view on uranium investing, starting to research and having a watch list of mining stocks for future accumulation might be a good idea in this environment. I previously wrote another article on this topic called, Rising Demand to Power Uranium Industry. One thing to note: with the sell-off in commodity prices, one market that hasn’t sold off much at all is uranium. While it’s not a highly traded commodity, it is still quite bullish for those interested in uranium investing to see prices remain stable.

Cameco Corporation (NYSE/CCJ) is a huge firm involved … Read More

Precious Metal Stocks in Correction—It’s
Time to Look Closer

By for Profit Confidential

precious metalsThe prices of gold and other precious metals are in correction and therefore gold and other precious metal stocks are in correction. I think it’s particularly important for stock market speculators to be paying attention to this sector as it corrects. There are a lot of very attractive mining companies out there with lots of cash and great producing properties.

No matter what the story, the fact of the matter is that precious metal stocks trade commensurately with underlying spot prices. They tend to trade on their own, not lockstep with the rest of the stock market. A mining company could be generating outstanding production and earnings growth, but stock market investors (I should say speculators, because mining stocks are 100% risk-capital investments) are always looking to the future and that means if the spot price is going down, so must precious metal stocks.

As a stock market sector, precious metal stocks have been in decline for some time now and valuations are getting to be very attractive. If you were interested in speculating in this sector, I’d put together a list of five top companies right now within the group and start following them. The spot prices for gold and silver may continue to correct for another couple of quarters, but I really feel that the upward commodity price cycle isn’t finished quite yet, especially with the underreported inflation in the U.S. economy.

Precious metal stocks take their lead from gold prices and, at $1,600 an ounce, the correction in gold hasn’t been that bad at all. Because precious metal stocks are considered to be risk-capital investments, speculators within … Read More

Sell in May and Go Away? It’s
Certainly Looking That Way

By for Profit Confidential

financial crisisThe current stock market correction has some legs, so be prepared for more downside. We’ve got gold below $1,600 an ounce and oil solidly below $100.00 a barrel—this is a broad-based market correction in investable assets and it will likely linger for a while.

The stock market began to roll over naturally after the majority of first-quarter earnings were reported. We were due for a market correction just based on the market’s strong performance from the beginning of the year. Then, the most recent catalyst was the political uncertainty in the eurozone and the continuing worries regarding European sovereign debt. The timing could not have been more perfect. Going forward, I wouldn’t be surprised at all if stock market trading action is difficult right until the end of the summer. Then, it’s election fever. The old adage, “Sell in May and go away,” looks like a winner this year.

In terms of investment strategy, now isn’t the time to be a buyer. I think stock market investors should wait for the current market correction to play itself out, while watching for good corporate news and dividend increases. The spot price of gold is also in correction mode and could be soft for the next couple of quarters, perhaps even into next year. For stock market speculators, I continue, however, to like mining stocks. For the majority of an equity portfolio, higher dividend paying stocks are the only way to go in a slow growth environment.

Investor sentiment isn’t all that bad at this time. The stock market needed a market correction and is gyrating on Europe, but the domestic outlook … Read More

Want to Buy Low/Sell High? What You Need to Know

By for Profit Confidential

dividend paying stocksThe spot price of gold really needs to hold above $1,700 an ounce in order to maintain its positive short-term price momentum. There is good underlying strength for gold long-term and, to illustrate it, just pull up a five- and 10-year chart on the spot price. The outlook for gold remains positive and the same goes for silver.

Like other sectors of the stock market, there is no rush to be taking on new positions in mining stocks. It’s still one of the most attractive areas for risk-capital speculators, but, like the rest of the stock market, a lot of the upward price move has already occurred. This is why I’m not advocating that investors consider new positions in stock market index funds. The stock market should keep ticking higher this year, but the move is likely to be incremental. Economic fundamentals are getting better, but not that quickly.

 This leads me to one of the best, but most difficult, investment strategies to try to be consistently good at—the buy low/sell high strategy. Just in recent history, gold and mining stocks were good trades after the spot price corrected. (See Opportunity for Gold Investments: Gold Stocks Sell Off, While Spot Price Hangs Tough.) But the price action can be swift and the major gains can slip away from you very quickly. If you were buying the stock market today, for example, you’d be buying at its three-year high. That doesn’t really fit the buy low/sell high investment philosophy.

 Good opportunities for investment do not come around very often (in gold, the stock market, business, or real estate). There have … Read More

Platinum Surges 15% in Seven
Weeks; Now Where Does it Go?

By for Profit Confidential

platinumSome of the toughest decisions an investor has to make occur when you are up on a trade. I’ve highlighted some of the merits in investing in precious metals like platinum before, the last being on January 11, 2012, in the article Investors—Should You Consider Platinum?

At the time I wrote the article, platinum was trading approximately $1,497; as of today, the market for platinum is trading around $1,723, a move of approximately 15% in less than seven weeks. In fact, the entire precious metals space has moved up sharply since I have been talking about this market. Indeed, the entire team at Profit Confidential has been making our readers aware of the potential for profits in the precious metals space for many years.

gold investments

To understand where we’re going, let’s take a look at some fundamental news that has affected the price of platinum by looking at some mining stocks that extract precious metals. Impala Platinum Holdings Limited (Pink Sheets/IMPUY) is a South African miner of precious metals and produces approximately 25% of the global platinum supply. The firm was hit by a strike, which resulted in the dismissal of roughly 17,000 employees. As of February 14, 2012, the firm has lost 60,000 ounces of platinum production due to the strike stoppage. This strike reduces daily platinum output by roughly 3,000 ounces per day.

Mining stocks that have issues with supply in precious metals like platinum force the market to reduce existing stockpiles. This is a two-fold effect. The short-term demand drives up the price of platinum and, if the reduction in platinum production by mining stocks is due to … Read More

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