Posts Tagged ‘price of gold’
Stock Market Outlook Solid Based on Earnings and Valuation
By Mitchell Clark, B.Comm. for Profit Confidential
The stock market certainly isn’t going up because of stronger expectations for corporate earnings. But I think all the conservative forecasts by corporations will lead to another quarter of mostly outperformance this upcoming earnings season. Companies have consistently been able to generate good earnings, even with lackluster revenue growth. Cost cutting is paying off in terms of solid earnings results, and this is the reason why balance sheets are so strong.
With companies in such a good financial condition, a new upward business cycle should produce a major acceleration in corporate earnings. The key, of course, is jump-starting a new business cycle, and it will be awfully difficult to do this if policymakers aren’t able to address all the issues regarding sovereign debt and the fiscal cliff. Country finances are going to be a major issue next year.
The best thing the stock market has going for it right now is its reasonable valuation. (See “Equities Market Doing Fine—Just Look at the Long-term Charts.”) That gives the stock market a lot of leeway, with all the uncertainty on the horizon. We know the stock market went up recently on the hope of new monetary stimulus from the Federal Reserve. Contributing to positive investor sentiment has been quiet on the eurozone’s sovereign debt crisis, somewhat improved U.S. economic news and a weaker U.S. dollar. Whether this lasts is all up to the Federal Reserve.
There really isn’t anything more the central bank can do to stimulate the U.S. economy. Further action from the Federal Reserve will only be to appease Wall Street investors. If the central bank disappoints the … Read More
Gold Stocks Breaking Out of Their Correction
By Mitchell Clark, B.Comm. for Profit Confidential
The price of gold is going up, and it just crossed $1,660 an ounce. Silver crossed $30.00 an ounce. You might say that precious metals are back. You can plainly see the resurgence in gold stocks, which have really turned around from what was a considerable period of weakness. The majority of gold stocks have been trending lower all year, as the spot price has been consolidating.
Expectations for more monetary stimulus from the Federal Reserve are contributing to a weaker U.S. dollar, which is helping precious metals (and oil prices) move higher. If the Federal Reserve takes additional action at its next Federal Open Market Committee (FOMC) meeting in September, then the recent strength in gold prices should carry right into 2013. (See “Federal Reserve: Will It Act Soon to Jump Start the Economy?”) Regardless, I wouldn’t be without some exposure to gold over the near term; I think we have the makings of a new upward trend in gold prices.
Across the board, mining companies have had a tough year on the stock market. It’s as if institutional investors just abandoned the entire group. Even large-cap dividend-paying heavyweights in the gold sector have been under a lot of pressure. And the funny thing is that the spot price of gold really hasn’t corrected all that much from its record high. As is usually the case, gold investors join the bandwagon late and leave it very quickly.
Newmont Mining Corporation (NYSE/NEM) has been struggling all year. The stock was trading at $60.00 a share at the beginning of the year and hit a low of $42.95. In … Read More
Gold Update: Precious Metal Stuck in the Short Term
By George Leong, B.Comm. for Profit Confidential
If you’re looking to make money playing the long side in gold, you may want to wait a bit unless you are willing to trade the range. The yellow metal is no longer in a bear market, but it is also not ready to rally much higher in the short term.
On the supportive side, we have the eurozone mess, slowing in China, and high overall market risk.
Since cash gold traded at a record $1,920.18 on September 6, 2011, the precious metal has declined 16.7%. Even after the recent break back above $1,600 to $1,629.20 on July 27, I still sensed that prices were not sustainable and would be heading back below $1,600. This downside move occurred on Wednesday, following the break below $1,600.
I continue to feel $1,600 will not be sustainable.
The established range is between $1,525 and $1,600. A bearish death cross remains on the chart, with the 50-day moving average (MA) of $1,592.93 well below the 200-day MA of $1,654.01.
The threat now is the 11-year streak, as gold is down 7.1% since January 1. The one-year return to August 1 is -2.96%.
Clearly, much of the easy money in gold has been made for the time being.
Just take a look at the multi-year returns to July 1, 2012, in the following table.
So while gold is currently stuck. I’m not ready to give up, but then I would also be more careful in adding positions, whether in physical gold or gold stocks. The reality is that the current technical picture has a slightly bearish bias and is void of any buying … Read More
China to Become World’s Biggest Buyer of Gold in 2012
By Michael Lombardi, MBA for Profit Confidential
Gold bullion imports from Hong Kong into mainland China increased 600% in May 2012 when compared to May 2011! (Source: Bloomberg, July 9, 2012.)
China is set to take the lead from India as the largest purchaser of gold bullion in 2012. The World Gold Council estimates that China will buy at least 870 tons of gold bullion in 2012.
Just to give an idea of how large these purchases of gold bullion are, in the first five months of 2012, China has imported over 300 tons of gold bullion from Hong Kong. Just isolating this number alone would put China as the 17th largest holder of gold bullion in the world!
As I’ve been writing in these pages, as the price of gold has fallen, China has provided money to its gold miners, which they in turn have used to buy other gold miners around the world. These Chinese gold mining companies then bring the gold bullion back in the country, but the statistics surrounding these imports are not published.
The only reason why we know of China’s insatiable demand for gold bullion is that it is Hong Kong that publishes the statistics quoted above.
As of a few years ago, China also banned the export of its gold bullion. The country had the capacity to pull roughly 390 tons of the yellow metal out of the ground, but has kept it all for itself.
Despite the country’s concerted effort to buy as much gold bullion as possible, the price of gold remains in a trading range. One of the factors holding the price of gold down is India…. Read More
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