Best of the Week
Most Popular
1.Gold Price Crash Through Key Support, Crude Oil in Freefall - Clive_Maund
2.Marc Faber Warns Japan's Bond-Buying Program is a Ponzi Scheme - Bloomberg
3.Silver Price and Powerful Forces - DeviantInvestor
4.Stocks Bear Market Catastrophe as Stocks Flash Crash to New All Time Highs - Nadeem_Walayat
5.Marc Faber Warns Not to Hold Any Gold in the U.S. - GoldCore
6.U.S. Housing Market San Francisco at Critical Mass - Harry_Dent
7.Global Scramble For Silver - Coins “Hard To Get,” “Premiums Likely To Jump” - GoldCore
8.Major World Stock Market Indices Analysis: SPY, QQQ, DAX, FTSE, CAC, HSI - Michael_Noonan
9.Japan's kaput?! - Axel_Merk
10.Tesco Empire Strikes Back, £5 off £40 Discount Voucher Spend Explained, Exclusions Warning! - Nadeem_Walayat
Last 5 days
Manipulated Stock Market Short Squeezes to Another All Time High - The China Syndrome - 23rd Nov 14
Gold Price 2015 - 22nd Nov 14
Stock Market Medium Term Top? - 22nd Nov 14
Is the Gold And Silver Golden Rule Broken? - 22nd Nov 14
Malaysia's Subsidy and Budget Deficit Conundrum - 22nd Nov 14
Investors Hated Gold at Precisely the Wrong Time: What About Now? - 22nd Nov 14
Gold and GLD ETF Selloff - 22nd Nov 14
Currency Wars, the Ruble and Keynes - 21st Nov 14
Stock Market Investor Sentiment in The Balance - 21st Nov 14
Two Biotech Stocks Set to Double on One Powerful Catalyst - 21st Nov 14
Swiss Gold Poll Likely Tighter Than Polls Suggest - 21st Nov 14
Gold's Volatility and Other Things to Watch - 21st Nov 14
Australia Stock Market and AUD Dollar Analysis (ASX200 and AUDUSD) - 21st Nov 14
New Algae Research May Have Uncovered an “Energy Forest” Under the Sea - 21st Nov 14
The Cultural and Political Consequences of Fiat Money - 20th Nov 14
United States Social Crisis - No One Told You When to Run, You Missed the Starting Gun! - 20th Nov 14
Euro-Zone Tooth Fairy Economics, Spain Needs to leave the Euro - 20th Nov 14
Ebola Threat Remains a Risk - New Deaths in Nebraska and New York - 20th Nov 14
Stock Market and the Jaws of Life or Death? - 20th Nov 14
Putin’s World: Why Russia’s Showdown with the West Will Worsen - 20th Nov 14
Making Money While The World Burns - 20th Nov 14
Why This "Quiet Zone" Is Now Tech Stocks Biggest Profit Sector - 20th Nov 14
My Favorite Stock McDonalds Just Got Kicked Off My “Buy” List - 19th Nov 14
European Economies in Perpetual State of Shock, What's Scarier Than Deflation? - 19th Nov 14
Breakfast with a Lord of War and Nuclear Weapons - 19th Nov 14
The U.S. Economy’s Ebb and Flow - 19th Nov 14
What You Need to Know Before Investing in Alibaba - 19th Nov 14
Forget About Crude Oil Price Testing 2009 Low - 19th Nov 14
What Blows Up First? Part 5: Shale Oil Junk Bonds - 19th Nov 14
Bitcoin Price Did We Just See an Important Slump? - 18th Nov 14
How to Profit From Oversold Crude Oil Price - 18th Nov 14
Stock Valuations Outrunning Profits Growth - And the Band Played On - 18th Nov 14
ECB Buy Gold Bullion? Japan's Monetary Policy Dubbed "Ponzi Scheme" - 18th Nov 14
Gold, Silver, Crude and S&P Ending Wedge Patterns - 18th Nov 14
How High Could USD/JPY Go? - 18th Nov 14
On Obama and the Nature of Failed Presidencies - 18th Nov 14
Globalism Free Trade Immigration Connection - 18th Nov 14
An Epiphany From Hell - Buy Gold and Silver - 18th Nov 14
Too Difficult to Get a U.S. Home Loan - 18th Nov 14
Has the Gold Bear Trap Been Set - 18th Nov 14
Gold Price and Miners Soar on Huge Volume - 17th Nov 14
Cameron Says Second Global Economic Crash is Loomin, Japan in Recession - 17th Nov 14
How to Play the Stock Market 2014 Year-End Rally - 17th Nov 14
What The Fed Has Wrought, Who Needs Wage Earners Anyway? - 17th Nov 14
Stock Market Indexes Fluctuate Along Record Levels - Will Uptrend Continue? - 17th Nov 14
Stock Market Trend Deceleration Tends To Precede Corrections - 17th Nov 14
Stocks Bull Market Set to Continue After Consolidation - 17th Nov 14
The World Is Run By Fools, And We Let Them - 17th Nov 14
Gold Price Golden Bottom? - 17th Nov 14

Free Instant Analysis

Free Instant Technical Analysis


Market Oracle FREE Newsletter

Gold Report 2015

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