Best of the Week
Most Popular
1.US Paving the Way for Massive First Strike on North Korea Nuclear and Missile Infrastructure - Nadeem_Walayat
2.Trump Reset: US War With China, North Korea Nuclear Flashpoint - Video - Nadeem_Walayat
3.Silver Junior Mining Stocks 2017 Q2 Fundamentals - Zeal_LLC
4.Soaring Inflation Plunges UK Economy Into Stagflation, Triggers Government Pay Cap Panic! - Nadeem_Walayat
5.The Bitcoin Blueprint To Your Financial Freedom - Sean Keyes
6.North Korea 'Begging for War', 'Enough is Enough', is a US Nuclear Strike Imminent? - Nadeem_Walayat
7.Bitcoin Hits All-Time High and Smashes Through $5,000 As Gold Shows Continued Strength - Jeff_Berwick
8.2017 is NOT "Just Another Year" for the Stock Market: Here's Why - EWI
9.Gold : The Anatomy of the Bottoming Process - Rambus_Chartology
10.Bitcoin Falls 20% as Mobius and Chinese Regulators Warn - GoldCore
Last 7 days
Stock Market Calm Before The Storm - 20th Oct 17
GOLD Price Creates Bullish Higher Low - 20th Oct 17
Here’s the US’s Biggest Vulnerability in NAFTA Negotiations - 20th Oct 17
The Greatest Investing Lesson Learned from the 1987 Stock Market Crash - 20th Oct 17
Stock Market Time to Go All-in. Short, That Is - 19th Oct 17
How Gold Bullion Protects From Conflict And War - 19th Oct 17
Stock Market Super Cycle Wave C May Have Started - 19th Oct 17
Negative Expectations, Will the Stock Market Correct? - 19th Oct 17
Knowing the Factors Affect your Car Insurance Premium - 19th Oct 17
Getting Your Feet Wet In Crypto Currencies - 19th Oct 17
10 Years Ago Today a Stocks Bear Market Started - 19th Oct 17
1987 Stock Market Crash 30th Anniversary Greatest Investing Lesson Learned - 19th Oct 17
Virgin Media Broadband Down, Catastrophic UK Wide Failure! - 19th Oct 17
The Passive Investing Bubble May Trigger A Massive Exodus from Stocks - 18th Oct 17
Gold Is In A Dangerous Spot - 18th Oct 17
History Says Global Debt Levels Will Lead to Another Crisis - 18th Oct 17
Deflation Basics Series: The Quantity Theory of Money - 18th Oct 17
Attractive European Countries for Foreign Investors - 18th Oct 17
Financial Transcription Services – What investors should know about them - 18th Oct 17
Brexit UK Vulnerable As Gold Bar Exports Distort UK Trade Figures - 18th Oct 17
Surge in UK Race Hate Crimes, Micro-Racism, Sheffield, Millhouses Park, Black on Asian - 18th Oct 17
Comfortably Numb: Surviving the Assault on Silver - 17th Oct 17
Are Amey Street Tree Felling's Devaluing Sheffield House Prices? - 17th Oct 17
12 Real-Life Techniques That Will Make You a Better Trader Now - 17th Oct 17
Warren Buffett Predicting Dow One Million - Being Bold Or Overly Cautious? - 17th Oct 17
Globalization is Poverty - 17th Oct 17
Boomers Are Not Saving Enough for Retirement, Neither Is the Government - 16th Oct 17
Stock Market Trading Dow Theory - 16th Oct 17
Stocks Slightly Higher as They Set New Record Highs - 16th Oct 17
Why is Big Data is so Important for Casino Player Acquisition and Retention - 16th Oct 17
How Investors Can Play The Bitcoin Boom - 16th Oct 17
Who Will Be the Next Fed Chief - And Why It Matters  - 16th Oct 17
Stock Market Only Minor Top Ahead - 16th Oct 17
Precious Metals Sector is on Major Buy Signal - 16th Oct 17
Really Bad Ideas - The Fed Should Have And Defend An Inflation Target - 16th Oct 17
The Bullish Chartology for Gold - 15th Oct 17
Wikileaks Mocking US Government Over Bitcoin Shows Why There Is No Stopping Bitcoin - 15th Oct 17
How to Wipe Out Puerto Rico's Debt Without Hurting Bondholders - 15th Oct 17
Gold And Silver – Think Prices Are Manipulated? Look In The Mirror! - 15th Oct 17
Q4 Pivot View for Stocks and Gold - 14th Oct 17
Gold Mining Stocks Q3’17 Preview - 14th Oct 17
U.S. Mint Gold Coin Sales and VIX Point To Increased Market Volatility and Higher Gold - 14th Oct 17
Yuan and Gold - 14th Oct 17
Tips for Avoiding a Debt Meltdown - 14th Oct 17

Market Oracle FREE Newsletter

3 Videos + 8 Charts = Opportunities You Need to See - Free

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

© 2005-2017 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

Catching a Falling Financial Knife