Miners Say Gold Going Higher - Tactical Trading
November 07 2011 - 7:00PM
Zacks
Think gold is another asset bubble waiting to pop? The strength of
the mining stocks is telling a different story based on a mix of
near-term and secular trends.
The big picture story we know: in an era of fiat
currencies being printed to fulfill quantitative easing policies,
the barbarous relic has renewed its status as a monetary vehicle, a
way for investment managers to diversify their exposure to dollars,
euros, yen, or pounds.
Holders of paper currency, printed to sustain
numerous, ominous bubbles of debt, have an appetite for exchanging
it for "hard" currency. And this hunger is only likely to
continue.
The near-term story is that we are in the midst of
a seasonally strong period for gold where it's very likely the
yellow metal makes a run for its all-time highs above $1,900.
And strong gold stocks are confirming this
likelihood by threatening, if not forging, new highs this week. Two
weeks ago I looked at four attractive names with market caps less
than half the size of the giants Barrick Gold (ABX),
Goldcorp (GG), and Newmont Mining (NEM).
Here again are those "smaller" miners with earnings
momentum leading the charge higher this week. Each is displayed
with market cap, forward multiple, and a 2-year weekly chart for
perspective in this historic gold rush.
Randgold Resources (GOLD): $11 B, 25.4
P/E
![](http://www.zacks.com/images/upload_dir/1320784903.jpg)
Gold Fields (GFI): $13.25 B, 13.25 P/E
![](http://www.zacks.com/images/upload_dir/1320784949.jpg)
AngloGold Ashanti (AU): $18.5 B, 13.25
P/E
![](http://www.zacks.com/images/upload_dir/1320784996.jpg)
Royal Gold (RGLD): $4.4 B, 38 P/E
![](http://www.zacks.com/images/upload_dir/1320785058.jpg)
The New Heavyweights of Gold
The Market Vectors Gold Miners ETF (GDX) is the
most popular basket for trading all these names at once. The "big
3" mentioned earlier, Barrick, Goldcorp, and Newmont, combine to
form 40% of the weighting of GDX with their respective market caps
of $53 B, $43 B, and $35 B.
But part of the reason you are seeing the big moves
in the sub-$20 B names is because three of the four I picked two
weeks ago -- AngloGold, Gold Fields, and Randgold -- are in the top
ten holdings, totaling over 15% of the fund's weighting.
The one that caught me by surprise was Goldfields.
I have been bullish on this stock since it was trading $15 over the
summer. It may still be the one with the most percentage
upside.
The Monetary Phenom
For a fun look back at a bad hair day for me (I
know, they all are), check out this CNBC video clip (link below)
where I was interviewed by Maria Bartiromo about gold becoming a
monetary phenomenon.
My forecast in November 2009, when gold was just
making new highs above $1,150, was that we would see $2,000 within
18 months because central banks were accumulating to diversify
their foreign currency reserves.
Yeah, it took more like 21 months and I fell shy by
75 bucks as only $1,923.70 was reached September 6 of this year.
But, close enough right?
The Gold Standard
Kevin Cook is a Senior Stock Strategist with
Zacks.com
BARRICK GOLD CP (ABX): Free Stock Analysis Report
ANGLOGOLD LTD (AU): Free Stock Analysis Report
GOLD FIELDS-ADR (GFI): Free Stock Analysis Report
RANDGOLD RSRCS (GOLD): Free Stock Analysis Report
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