Best of the Week
Most Popular
1.Scottish Independence YES Vote Panic - Scotland Committing Suicide and Terminating the UK? - Nadeem_Walayat
2.Independent Scotland Will Disintegrate as Unionist Regions Demand Referendum's to Rejoin UK - Nadeem_Walayat
3.Bank of England Panic! Scottish Independence Bank Run Already Underway! - Nadeem_Walayat
4.Gold and Silver Price Ready To Go BOOM - Austin_Galt
5.Gold and Silver Potential Price Meltdown Scenario - Rambus_Chartology
6.Scottish Independence UK Catastrophe - The Balkanisation of Britain - Video - Nadeem_Walayat
7.The Price Of Gold And The Art Of War Part I - Darryl_R_Schoon
8.Main Reason Why Scotland Will Vote NO to Independence, 70% Probability - Nadeem_Walayat
9.Heavy Gold and Silver Shorting is Bullish - Zeal_LLC
10.10 Year U.S. Treasury Short Best Place to be Remainder of 2014 - EconMatters
Last 5 days
Scotland Independence Result NO Win 55% to Yes on 45% - 18th Sept 14
Silver Price: A Collapse and a Rally - 18th Sept 14
Here's Why Trendlines are Your New Trading Best Friend - 18th Sept 14
Silver Buyers Keep Stacking And Demand Higher Despite Falling Prices - 18th Sept 14
The "Hidden" Billions in the Alibaba IPO - 18th Sept 14
Russian Union Of Engineers Accuses Ukraine Airforce In MH17 Crash - 18th Sept 14
Monetary Policy Weighs on Gold and Silver - 18th Sept 14
Global Currencies Analysis...The World According to Chartology - 18th Sept 14
Gold Price Hammered by Strong U.S. Dollar - 18th Sept 14
Is Citigroup the Dumbest Bank Ever? - 18th Sept 14
Scotland Must Vote Yes! For All Of Us - 18th Sept 14
Scottish Independence Referendum Result NO 55%, YES 45% - Vote Forecast - 18th Sept 14
A Public Bank Option for and Independent Scotland - 17th Sept 14
The Charade of Independence for Scotland and UKIP - 17th Sept 14
Gold Report - U.S. National Debt Surges $1 Trillion In Just 12 Months - 17th Sept 14
How to Find Trading Opportunities in ANY Market Using Fibonacci Analysis - 17th Sept 14
Why Money Is Worse Than Debt - 17th Sept 14
Can Gold Price Finally Recover? - 17th Sept 14
Scotland Independence - Europe Holds Its Breath - 17th Sept 14
The Energy Prices at Risk with Scottish Independence - 17th Sept 14
Scottish Independence SNP Lies on NHS, Economy, Debt, Oil and Currency - 17th Sept 14
The Truth Behind the Dangerous "Helicopter Money" Delusion - 16th Sept 14
Central Bank Balance Bullying: Investor Implications - 16th Sept 14
U.S. Dollar and Gold Elliott Wave Projection - 16th Sept 14
The Origins and Implications of the Scottish Referendum - 16th Sept 14
The Collapse Of U.S. Silver Stocks As Public Debt Skyrockets - 16th Sept 14
Emerging Markets Are Set Up for a Crisis, What’s on Your Radar Screen? - 16th Sept 14
Scottish Independence Bank Run Already Underway - Video - 16th Sept 14
The Emergence of the US Petro-Dollar - 16th Sept 14
Economic GDP Drives Stock Prices Inestment Myth - 16th Sept 14
Don't Miss This Gold Buying Opportunity - 16th Sept 14
Why ECB QE Is Bearish For Gold Prices - 15th Sept 14
Property Rights and Property Taxes—and Countries That Don’t Have Them - 15th Sept 14
Junior Miners Breaking Out Higher Forecasting Gold and Silver Price Bottom? - 15th Sept 14
Stock Market Patiently Waiting for Mean Reversion - 15th Sept 14
A Closer Look at the US Dollar - 15th Sept 14
The Silver Price Sentiment Cycle - 15th Sept 14
Stock Market Correction Underway - 15th Sept 14
Marc Faber - “I Want To Be Diversified, I Want To Own Some Gold” - 15th Sept 14
The Myth of Nuclear Weapons - 15th Sept 14
US Dollar Forecast to Go Much Higher - 15th Sept 14
Analysis And Price Projection Of The Uranium Market - 15th Sept 14
Bank of England Panic! Scottish Independence Bank Run Already Underway! - 15th Sept 14
The Ethics of Entrepreneurship and Profit - 14th Sept 14
The Big Investor Opportunity in the Orbital Space Junkyard - 14th Sept 14
Kohl's and The Rest of The Retailers are in Deep Doo Doo - 14th Sept 14
Independent Scotland Will Disintegrate as Unionist Regions Demand Referendum's to Rejoin UK - 14th Sept 14
Stock Market Pullback Continues - 13th Sept 14
SNP Fanatics Warn of Day of Reckoning for Scottish Independence No Campaigners - 13th Sept 14
Scottish Independence Would Shake Up the Global System - 13th Sept 14
The World Order Becomes Disorder - 13th Sept 14

Free Instant Analysis

Free Instant Technical Analysis


Market Oracle FREE Newsletter

Huge Stocks Bear Market

Gold Mining Stocks: Now is the Time to Buy

Commodities / Gold & Silver Stocks May 31, 2012 - 12:52 PM GMT

By: Money_Morning

Commodities

Best Financial Markets Analysis ArticleDon Miller writes: There are lots of reasons you should own some gold. Despite taking a recent breather, gold prices are still up by 139% in the last five years.

Even so, shares of gold mining stocks have suffered lately, hurt mainly by higher energy and exploration costs.


In fact, the stocks of the large gold miners have become nearly as undervalued as they were during the 2008 financial crisis.

The last time shares of these big gold producers were this cheap, they rallied by 283%.

At these levels, that means it's time to take a closer look at shares of big gold miners - while they are still a bargain.

Here's what you need to know...

The Gold Bull Market is Not Over

A number of factors point to higher prices for gold:

•Real interest rates remain in negative territory. Sitting in cash right now is a losing proposition.
•The austerity movement in Europe is being replaced with more fiscal easing. The European Central Bank may have to print trillions of euros of debt to keep the Eurozone intact.
•The odds of more fiscal stimulus in China and the U.S. have increased, as two of the world's largest economies struggle to gain traction.
•Despite healthy demand and rising prices, global production of the metal rose just 0.7% annually from 1999 through 2011.

Combined with aggressive gold-buying binges by China and other foreign governments moving away from the U.S. dollar, the stage is set for the price of gold to rally.

Indeed, a report from Morgan Stanley (NYSE: MS) earlier this month declared the bull market in gold remains firmly intact.

Gold Mining Stocks Are Oversold

That is typically good for gold mining stocks.

After all, as the price of gold goes up, gold stocks typically move even higher. When gold prices rallied in 2009 and 2010, gold stocks tracked right along with them.

But the two parted company in 2011. While spot gold moved higher for the 11th straight year, gaining 10% -- gold stocks plunged by 16% last year.

That trend accelerated in 2012. After peaking at $1,900.03 last September, gold bullion prices fell by roughly 21% to $1,486.

Meanwhile, gold stocks, as measured by the Market Vectors Gold Miners Fund (NYSEArca: GDX), plunged by as much as 41%.

In fact, the gap between the two has widened to almost historic highs.On May 1, gold stocks were trading 29% below where they normally would trade according to John Doody of the Gold Stock Analyst.

The only time these stocks have ever traded at a greater discount to gold was in the October 2008 crash, when they traded at a 34% discount.

On top of all that, sentiment surrounding the gold sector is extremely negative.

The Hulbert Gold Newsletter Sentiment Index, which measures the exposure recommended by short-term gold market timers was recently negative for 29 straight days -- longer than any other stretch in history.

In other words, how investors view gold is about as negative as it can get.

"Gold traders' increasing impatience has led even more of them to throw in the towel - which, in turn, is why contrarians are confident that gold's next major move is most likely up," Mark Hulbert told Money News.

Bottom line: the upside potential for gold shares clearly outweighs the downside risk.

Gold mining stocks are badly oversold.

Prices Start to Rally

Meanwhile, gold stocks are finally starting to outperform the metal itself. GDX is up 15% in the past two weeks, even as spot prices have gained only 2.5%.

If gold prices bounce back to $1,900, the index could nearly double.

Besides GDX, you may want to take a look at a few of the largest gold miners. These are well-diversified companies with a collection of mines in several countries to mitigate risk.

Shares of the world's second largest producer, Newmont Mining Corp. (NYSE: NEM), just bounced off their 52-week low and trade at just eight times projected 2013 earnings.

NEM pays a 2.9% dividend, tied to the price of gold. Newmont's profit went from $4.7 billion in 2009 to almost $6.5 billion in 2011. The price of gold contributes heavily to its bottom line.

The opportunity to invest in undervalued gold mining stocks is a rare occurrence in a gold bull market.

The last time it happened was four years ago and shares rose 283%. Take advantage while you can.

Source :http://moneymorning.com/2012/05/31/gold-mining-stocks-now-is-the-time-to-buy/

Money Morning/The Money Map Report

©2011 Monument Street Publishing. All Rights Reserved. Protected by copyright laws of the United States and international treaties. Any reproduction, copying, or redistribution (electronic or otherwise, including on the world wide web), of content from this website, in whole or in part, is strictly prohibited without the express written permission of Monument Street Publishing. 105 West Monument Street, Baltimore MD 21201, Email: customerservice@moneymorning.com

Disclaimer: Nothing published by Money Morning should be considered personalized investment advice. Although our employees may answer your general customer service questions, they are not licensed under securities laws to address your particular investment situation. No communication by our employees to you should be deemed as personalized investent advice. We expressly forbid our writers from having a financial interest in any security recommended to our readers. All of our employees and agents must wait 24 hours after on-line publication, or after the mailing of printed-only publication prior to following an initial recommendation. Any investments recommended by Money Morning should be made only after consulting with your investment advisor and only after reviewing the prospectus or financial statements of the company.

Money Morning Archive

© 2005-2014 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

Free Report - Financial Markets 2014