NCM is now producing gold at a price above gold's market value. So the price of will continue to fall until NCM announces a capital raising.
There is an active thread Gold Price - Where is it heading?, and an inactive thread "gold stocks", but I would like to discuss gold mining stocks. I know we discuss gold mining stocks a bit in the Gold Price thread but maybe they need their own thread.
At the moment I am holding MML and SLR. I bought both on the 8 March and currently am up 5% on MML and down 3.8% on SLR. I have NST on my watch list. I generally try and buy stocks which I feel are undervalued and which I think have sound fundamentals. Thus these three stocks meet my criteria. I try and buy on momentum. With these gold stocks though, I am looking to ride what might be either a relief rally (short lived???) or a turnaround. Time will tell. So I am speculating.
I read an interesting article over the weekend about the taper being bullish for gold.
The theory was: The US is starting to taper due to the economy picking up.
If the economy is picking up there is growth. If the growth gets a bit too strong it may give rise to inflation.
With all that extra money sloshing around from the Bernanke this could make (unpredictable?) inflation the next issue which would be very bullish for gold.
There is an active thread Gold Price - Where is it heading?, and an inactive thread "gold stocks", but I would like to discuss gold mining stocks. I know we discuss gold mining stocks a bit in the Gold Price thread but maybe they need their own thread.
At the moment I am holding MML and SLR. I bought both on the 8 March and currently am up 5% on MML and down 3.8% on SLR. I have NST on my watch list. I generally try and buy stocks which I feel are undervalued and which I think have sound fundamentals. Thus these three stocks meet my criteria. I try and buy on momentum. With these gold stocks though, I am looking to ride what might be either a relief rally (short lived???) or a turnaround. Time will tell. So I am speculating.
RRL is the most likely candidate to give a decent bounce, it is favoured by the larger money and is sitting above a key level at 4.25 - based on the pattern I am seeing of large gold stock buying late last week it may be that there is a change taking place in the sector. Could easily be wrong. Perhaps it may be prompted by the movement of uncertain money in Europe which may get more headlines over the coming week.
Other stocks of gold - BDR has fantastic grades and costs. NST has low reserves but is a successful driller, AQG has large resources and has been hammered, SLR as mentioned -> more to come.
Take a look at Northern Mining NMI, the chaps behind the company seem like serious players. Share price have been flying...
Is Gold ready to make a serious move? Well, some stocks could be leading the way...SBM & EVN have broken out already. SBM has a nice "Rounding Bottom" in place on the weekly chart. Similar to a cup and handle but shows at lows. EVN has broken through resistance and has retested already...positive. ASL should break out of as pennant today...I think this is also in Tech A's thread. The XGD (Gold sub sector) has been making a basing pattern since mid 2013. It has yet to break out though. if it does...watch out!
If you want higher risk then DCN is worth a look. I like TRY too...that is definitely high risk/high reward though.
I am not a fundamentalist but there is a strong case for higher gold prices.
First of all the Chinese, India & Russia have been buying more gold than is being produced. Simple economics - supply & demand.
Gold is a natural hedge should world economies sink despite many analysts suggesting the correlation between the two has changed in modern times...doubt it.
If you want to define a useful "trend" in gold stocks, you just don't get much useful information by looking at gold stock prices themselves. Since 1975, when the XAU has been above its level of 6 months earlier, it has continued to advance at an annual rate of 0.65%. When the XAU has been below its level of 6 months earlier, it has advanced at an annual rate of 0.73%. That's as close as you can get to an indicator being perfectly uninformative.
Gold bullion prices have somewhat better information. When the price of gold is higher than 6 months earlier, the XAU has followed by advancing at a 6.87% annual rate, on average. When the price of gold is lower than 6 months earlier, the XAU has declined at a -4.31% annual rate. While that seems like a big performance difference, it is statistically insignificant because gold stock prices are wildly volatile. These average performances are just overwhelmed by that volatility to be of any practical use.
Ditto for inflation trends. When the rate of inflation has been higher than 6 months earlier, the XAU has advanced at an 8.18% annualized rate, compared to a -5.02% annualized loss when the rate of inflation has been lower than 6 months earlier. As a "tendency" this information is useful, but as a guide to investing, the volatility still overwhelms this predictable component of price movements.
The trend of long term interest rates is actually more important than the trend of inflation. When the 30 year Treasury yield has been below its level of 6 months earlier, the XAU has advanced at an annualized rate of 19.17%, compared to an annualized loss of -17.51% when Treasury yields have been rising. Since economic weakness tends to produce falling real interest rates, we also get a strong difference in performance based on whether the economy is expanding or contracting. When the NAPM Purchasing Managers Index has been below 50, indicating a contracting economy, the XAU has surged at an annualized rate of 23.48%, compared to an annualized loss of -9.66% when the PMI has been above 50. On the valuation front, when the ratio of gold prices ($/ounce) to the XAU has been above 4.0, the XAU has advanced at an average annualized rate of 24.82%, compared to a -13.34% annualized loss when the Gold/XAU ratio has been below 4.0. That means that you generally want to buy gold stocks when they are lagging the price of the metal. And given the fact that trends in the XAU itself are uninformative about future returns, it also means that you are better off buying gold stocks on dips than to buy upside "breakouts".
Not surprisingly, the combination of all of these is rare but extremely powerful. In the rare instances when 1) The rate of inflation has been higher than 6 months earlier, 2) Treasury bond yields have been lower than 6 months earlier, 3) the NAPM Purchasing Managers Index has been below 50, and 4) the Gold/XAU ratio has been above 4.0, the XAU has soared at an astounding rate of 123.63% annualized. In contrast, when none of these have been true, the XAU has plunged at -53.21% annualized. That's a gaping difference.
Hi Porper,
These days I treat gold mining stocks essentially like utilities stocks, inspired by the work of John Hussman who holds both gold miners and utilities in his total return fund (benchmark is US Gov Bonds) and treats them similarly.
Here's some backtesting from him in one of his invaluable Weekly Market Comments (and also highlights his ensemble techniques which are heavily inspired by computer science research):
http://www.hussmanfunds.com/html/gold.htm
Nice link thanks sinner, makes for interesting reading. Not sure I understand some of it mind you...ensemble techniques especially.
Watched this yesterday, good content imo.
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