Best of the Week
Most Popular
1. TESLA! Cathy Wood ARK Funds Bubble BURSTS! - 12th May 21
2.Stock Market Entering Early Summer Correction Trend Forecast - 10th May 21
3.GOLD GDX, HUI Stocks - Will Paradise Turn into a Dystopia? - 11th May 21
4.Crypto Bubble Bursts! Nicehash Suspends Coinbase Withdrawals, Bitcoin, Ethereum Bear Market Begins - 16th May 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.Cathy Wood Ark Invest Funds Bubble BURSTS! ARKK, ARKG, Tesla Entering Severe Bear Market - 13th May 21
7.Stock Market - Should You Be In Cash Right Now? - 17th May 21
8.Gold to Benefit from Mounting US Debt Pile - 14th May 21
9.Coronavius Covid-19 in Italy in August 2019! - 13th May 21
10.How to Invest in HIGH RISK Tech Stocks for 2021 and Beyond - Part 2 of 2 - 18th May 21
Last 7 days
Investing in the Tulip Crypto Mania 2021 - 19th Jun 21
Here’s Why Historic US Housing Market Boom Can Continue - 19th Jun 21
Cryptos: What the "Bizarre" World of Non-Fungible Tokens May Be Signaling - 19th Jun 21
Hyperinflationary Expectations: Reflections on Cryptocurrency and the Markets - 19th Jun 21
Gold Prices Investors beat Central Banks and Jewelry, as having the most Impact - 18th Jun 21
Has the Dust Settled After Fed Day? Not Just Yet - 18th Jun 21
Gold Asks: Will the Economic Boom Continue? - 18th Jun 21
STABLE COINS PONZI Crypto SCAM WARNING! Iron Titan CRASH to ZERO! Exit USDT While You Can! - 18th Jun 21
FOMC Surprise Takeaways - 18th Jun 21
Youtube Upload Stuck at 0% QUICK FIXES Solutions Tutorial - 18th Jun 21
AI Stock Buying Levels, Ratings, Valuations Video - 18th Jun 21
AI Stock Buying Levels, Ratings, Valuations and Trend Analysis into Market Correction - 17th Jun 21
Stocks, Gold, Silver Markets Inflation Tipping Point - 17th Jun 21
Letting Yourself Relax with Activities That You Might Not Have Considered - 17th Jun 21
RAMPANT MONEY PRINTING INFLATION BIG PICTURE! - 16th Jun 21
The Federal Reserve and Inflation - 16th Jun 21
Inflation Soars 5%! Will Gold Skyrocket? - 16th Jun 21
Stock Market Sentiment Speaks: Inflation Is For Fools - 16th Jun 21
Four News Events That Could Drive Gold Bullion Demand - 16th Jun 21
5 ways that crypto is changing the face of online casinos - 16th Jun 21
Transitory Inflation Debate - 15th Jun 21
USDX: The Cleanest Shirt Among the Dirty Laundry - 15th Jun 21
Inflation and Stock Market SPX Record Highs. PPI, FOMC Meeting in Focus - 15th Jun 21
Stock Market SPX 4310 Right Around the Corner! - 15th Jun 21
AI Stocks Strength vs Weakness - Why Selling Google or Facebook is a Big Mistake! - 14th Jun 21
The Bitcoin Crime Wave Hits - 14th Jun 21
Gold Time for Consolidation and Lower Volatility - 14th Jun 21
More Banks & Investors Are NOT Believing Fed Propaganda - 14th Jun 21
Market Inflation Bets – Squaring or Not - 14th Jun 21
Is Gold Really an Inflation Hedge? - 14th Jun 21
The FED Holds the Market. How Long Will It Last? - 14th Jun 21
Coinbase vs Binance for Bitcoin, Ethereum Crypto Trading & Investing During Bear Market 2021 - 11th Jun 21
Gold Price $4000 – Insurance, A Hedge, An Investment - 11th Jun 21
What Drives Gold Prices? (Don't Say "the Fed!") - 11th Jun 21
Why You Need to Buy and Hold Gold Now - 11th Jun 21
Big Pharma Is Back! Biotech Skyrockets On Biogen’s New Alzheimer Drug Approval - 11th Jun 21
Top 5 AI Tech Stocks Trend Analysis, Buying Levels, Ratings and Valuations - 10th Jun 21
Gold’s Inflation Utility - 10th Jun 21
The Fuel Of The Future That’s 9 Times More Efficient Than Lithium - 10th Jun 21
Challenges facing the law industry in 2021 - 10th Jun 21
SELL USDT Tether Before Ponzi Scheme Implodes Triggering 90% Bitcoin CRASH in Cryptos Lehman Bros - 9th Jun 21
Stock Market Sentiment Speaks: Prepare For Volatility - 9th Jun 21
Gold Mining Stocks: Which Door Will Investors Choose? - 9th Jun 21
Fed ‘Taper’ Talk Is Back: Will a Tantrum Follow? - 9th Jun 21
Scientists Discover New Renewable Fuel 3 Times More Powerful Than Gasoline - 9th Jun 21
How do I Choose an Online Trading Broker? - 9th Jun 21
Fed’s Tools are Broken - 8th Jun 21
Stock Market Approaching an Intermediate peak! - 8th Jun 21
Could This Household Chemical Become The Superfuel Of The Future? - 8th Jun 21
The Return of Inflation. Can Gold Withstand the Dark Side? - 7th Jun 21
Why "Trouble is Brewing" for the U.S. Housing Market - 7th Jun 21
Stock Market Volatility Crash Course (VIX vs VVIX) – Learn How to Profit From Volatility - 7th Jun 21
Computer Vision Is Like Investing in the Internet in the ‘90s - 7th Jun 21
MAPLINS - Sheffield Down Memory Lane, Before the Shop Closed its Doors for the Last Time - 7th Jun 21
Wire Brush vs Block Paving Driveway Weeds - How Much Work, Nest Way to Kill Weeds? - 7th Jun 21
When Markets Get Scared and Reverse - 7th Jun 21
Is A New Superfuel About To Take Over Energy Markets? - 7th Jun 21

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Time to Invest in Gold? Consider These Four Factors First

Commodities / Gold and Silver 2015 Sep 18, 2015 - 06:35 AM GMT

By: Investment_U

Commodities

Sean Brodrick writes: The market expects gold to go lower as the Fed raises interest rates. That’s because gold pays no interest, unlike bonds. In fact, more than $2.6 billion was wiped from the value of gold exchange-traded products (ETPs) in just three weeks as investors awaited the Federal Reserve’s meeting. Ouch!

And in all, since gold entered a bear market in April 2013, a whopping $54 billion in value has bled out of gold ETPs. Holdings in bullion products fell to 1,508.2 metric tons on August 11.


That’s the lowest since 2009.

As the saying goes, trying to catch a falling knife is a good way to end up with bloody fingers.

But I don’t think that’s the case here. In spite of low prices and the threat of a looming interest rate hike, I’ll give you four good reasons why gold and miners are ready to blast off.

Gold Bullion Inventories Are Very Tight

Recent weeks have seen the cost of borrowing gold in London head sharply higher. Why would someone need to borrow gold in London? That’s a fair question.

What I’m referring to are the dealers who need to make good on contracts to deliver the yellow metal to refineries in Switzerland. There, the gold will be melted down and sent to Asia, where it tends to vanish. (For more on that story, check out this piece from April.)

The Swiss bankers used to be able to count on buying metal from the big gold ETPs. But with inventories in those funds scraping bottom, gold may be harder to come by, which, in turn, should up the price.

India’s Gold Imports Are Surging

India’s imports of gold jumped to more than 120 metric tons in August. That’s the highest level so far this year. In August 2014, the figure was a mere 50 metric tons. This despite the fact that India still has a 10% import duty on gold.

But India’s gold-crazy festival season is coming up. And so far, with prices at a month-long low, gold is looking like a bargain.

India’s government hates that its people have such a love for this “barbarous relic.” Recently, it approved two plans to lower physical demand for gold: sovereign gold bonds and gold monetization.

The sovereign gold bonds are aimed at curbing domestic demand for physical gold among investors. People can turn in gold and get bonds against them, paying an interest rate of around 3%. The bonds are for five to seven years, and for five, 10, 50 and 100 grams of gold. However, the depositor earns an interest rate below regular Indian government bonds (recently 7.75%). And that won’t compensate him for various risks.

In gold monetization, people turn in bullion or jewelry at a bank. While it’s being held, the owner will earn 2% to 3% in interest, tax-free. The aim here is enhancing the domestic supply of physical gold for jewelers. India is doing this because it wants to get the masses of idle gold lying dormant in vaults and households throughout the country out into the open. It’s especially meant to appeal to temples rumored to be sitting on vaults of gold.

So how well are these schemes working? Well, Indian gold imports are surging. That tells me these grand plans aren’t working at all.

Chinese Gold Demand Is Strong, Too

China’s gold demand as tracked by deliveries out of the Shanghai Gold Exchange (SGE) is very strong over the summer months - a time when demand is usually weak.

In fact, the flow of gold through the SGE is already 36% higher than last year and 13.5% higher than the level of 2013. And 2013 was a record year.

Shanghai Gold Exchange Withdrawals as of August chart

So, if you’ve been hearing in the media that Chinese gold demand is down this year, well, not if the deliveries out of the SGE are any indicator.

Sure, second-quarter demand was way down. But it’s coming back in a big way. In fact, a recent eight-week period saw 512 metric tons of gold withdrawn from the SGE. That’s higher than global mine production, which would be around 492 tons over the same time frame.

Here’s the thing: Chinese demand is usually stronger at the end of the calendar year as the Chinese New Year approaches. That’s when domestic gold consumption normally is at its highest.

This year isn’t set in stone. But it sure looks like it could set a new record.

Gold Miners Are “Absurdly Cheap.”

The Philadelphia Gold & Silver Index (XAU), the oldest of the gold miner indexes, has broken the low it made back in November 2000, when the gold bullion price was only $265 per ounce.

Gold verses Philadelphia Gold and Silver Index chart

Gold stocks aren’t just cheap right now. They’re stupid cheap. Many of them are turnaround stories, just waiting to head higher.

Here are some facts I recently told my $10 Trigger Alert subscribers about mega-miner Barrick Gold (NYSE: ABX)...

  • It expects all-in sustaining costs of $840 to $880 per ounce in 2015. The company has made slashing costs one of its top priorities.
  • It’s poised to ride a gold rally. Barrick should receive an extra $330 million in incremental EBITDA for every $100 rise in the price of an ounce of gold.
  • It’s slashing debt. Barrick is on track to reduce $3 billion in debt by 2016. On top of that, the company has $4 billion in an undrawn credit facility. So it can ride out the bad times.
  • Barrick is cheap! The stock is trading at 0.79 times sales and 0.74 times book value.

With fundamentals like this, you know it won’t take much to send Barrick and other quality miners blasting higher. And the really interesting thing is that gold miners look like they might be bottoming right now.

Check out this chart for the biggest gold miner ETF, Market Vectors Gold Miners (NYSE: GDX).

Market Vectors Gold Miners September 2014 to Present chart

By any measure, that is an ugly-looking chart. But this is where bottoms are formed. And you can see that a deeper low in price was not confirmed by the momentum indicator on the bottom of the chart.

In short: It looks like the bears are running out of steam.

Now, combine this with the extreme undervaluation in miners, the fact that the best miners are cutting costs sharply, the surge in demand out of China and India, and the strange rise in gold lease rates in London. It’s a recipe for a red-hot rally.

When it comes, you won’t want to miss out.

Good investing,

Sean

Editorial Note: In recent years, resources and resource stocks have taken a beating. There’s no question about it. But as we near the bottom, now is the time when opportunistic investors should be licking their chops. The question is: How can you tell the difference between an undervalued yet quality miner... and a company that could be toxic to your portfolio? To help you answer that question, Sean created the Resources to Riches Alliance.

This easy-to-follow course - broken into eight parts - will teach you everything you need to know about investing in the energy and natural resource markets. Even better, we’re currently offering a $50 discount to new members. Simply click this link and enter the code RICH50 at checkout.

Source: http://www.investmentu.com/article/detail/47609/time-to-invest-in-gold-miners-consider-these-four-factors-first#.VfuTk03bK0k

http://www.investmentu.com

Copyright © 1999 - 2015 by The Oxford Club, L.L.C 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 Investment U, Attn: Member Services , 105 West Monument Street, Baltimore, MD 21201 Email: CustomerService@InvestmentU.com

Disclaimer: Investment U Disclaimer: Nothing published by Investment U 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 investment 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 72 hours after the mailing of printed-only publication prior to following an initial recommendation. Any investments recommended by Investment U should be made only after consulting with your investment advisor and only after reviewing the prospectus or financial statements of the company.

Investment U Archive

© 2005-2019 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