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Market Oracle FREE Newsletter

Nadeem Walayat Financial Markets Analysiis and Trend Forecasts

Large Institutional Buying of Gold Stocks

Commodities / Gold & Silver Stocks Feb 13, 2008 - 03:18 AM GMT

By: David_Vaughn

Commodities Gold continues to do well but we are still impatiently awaiting the gold mining stocks to follow gold's lead. What's happening? Any reason for this? What do the statistics say about the gold equities?


“With gold knocking on $900 per ounce, most gold stock indices are making large advances despite an overly bearish sentiment on the broad equity markets. Large inflows into gold and silver ETFs are highlighting the point that there is major demand for stagflation insurance, namely gold and silver.” By Boris Sobolev, Jan 16 2008 , Kitco

Well, the “gold stock indices are making large advances…” So which stocks are moving and which stocks remain stagnant?

“Institutionals seem to have a voracious appetite for large gold producers in early 2008. Barrick Gold, Newmont Mining, Goldcorp and Gold Fields make up around 60% of the S&P/TSX Global Gold Index ($SPTGD on the chart below), as well as other highly followed indices such as the Gold Bugs Index ($HUI) and Philadelphia Gold & Silver Index ($XAU). All have made impressive gains on large volume and a ton of block trading, which are signs of major institutional involvement.” By Boris Sobolev, Jan 16 2008 , Kitco

Did you catch that last message? Institutionals seem to have a voracious appetite for large gold producers in early 2008.

So the large gold financial institutions are buying gold equities by the bucket load. And which stocks are they buying? The senior companies. It is only a matter of time before the junior stocks are covered. Let's listen to who I believe is one of the most competent gold analysts in the market.

Ken Gerbino - “…the juniors on a relative basis are extremely undervalued and that a substantial rally should be starting soon.” “ New money into the gold arena is going into the big names. These managers and investors have not started to look at Canada and the junior sector yet. But as they eventually get more familiar and comfortable with the industry they start looking for smaller growth and value situations and that leads them into the junior sector.” “The key to making an above average return is competent evaluations and patience. This sometimes takes many years. Patience will outweigh the volatility of the gold and silver mining sector as intrinsic value eventually gets recognized. The laws of supply and demand let you sleep comfortably.” Ken Gerbino, Kitco , 2-4-2008

Gold mining stocks will eventually rally but patience is the name of the game. Another highly rated gold analyst shares his longer term price for gold this year.

“I still see $1200 gold and $25 silver coming this year.” By Rick Ackerman, Kitco , 2-4-2008    

Think long term, always longer term. The price of gold in the short term will move in extremes in every direction but gold will be overall strong for the rest of this decade and beyond.

It's not too late to invest in gold related equities to take advantage of their wealth generating attributes. We are living in the last days of cheap resources and cheap commodities. Gold Letter, Inc. reviews undervalued gold stocks poised to rise in this time of increasing demand.

Click here to order Gold Letter

Send me an email.

By David Vaughn
Gold Letter, Inc.
David4054@charter.net

© Copyright 2008, Gold Letter Inc.

“The Worldwatch Institute, an organization that focuses on environmental, social and economic trends, says the current rate of global demand for resources is unsustainable.”  

The publisher and its affiliates, officers, directors and owner may actively trade in investments discussed in this newsletter. They may have positions in the securities recommended and may increase or decrease such positions without notice. The publisher is not a registered investment advisor. Subscribers should not view this publication as offering personalized legal, tax, accounting or investment-related advice. The news and editorial viewpoints, and other information on the investments discussed herein are obtained from sources deemed reliable, but their accuracy is not guaranteed. © Copyright 2008, Gold Letter Inc.

David Vaughn Archive

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