While the potential for higher gold prices is compelling, the decline in the number of discoveries and grades of resources makes mining stock selection intriguing. Niehuser has scoped out jurisdictions and finds the stars are aligning to put Nevada on top.
The US Mint's gold coin sales slid for a third consecutive year in 2012 showing how demand for gold bullion among the retail public remains lackluster at best. Demand remains well below the record levels seen preceding the Y2K scare in 1999.
Many gold analysts are forecasting much higher gold prices in 2013 but the senior commodity analyst at the CPM Group says he believes all of the positive gold fundamentals, such as global turmoil, are already factored into the gold price.
You need to find the quality management teams with money in the treasury, the ability to raise more and having the advanced projects that are well along the development path towards a mine that is going to be a long life, lowest quartile all-in cost producer.
There are many reasons to own physical gold. They arise from the financial and monetary uncertainty impacting investors around the globe. But do you also want to own the shares of gold mining companies? Two things need to be considered to answer this question.
We are at a level in the shares, just above $30, where value players start to come into this name. That puts the shares at a bargain basement 4X EBITDA. The 3.30% dividend yield is an additional kicker, more than double the ten year Treasury bond yield.
The upside to gold stocks is that investors historically have received a 2-to-1 leverage by owning gold equities instead of the commodity. We believe that effective management can help miners gain more leverage over the metal for their shareholders.
Gold recovered somewhat overnight in Asia and again today in Europe despite the sharp selling seen on the Comex yesterday. As ever, it is very difficult to pinpoint exactly why gold and all precious metals fell in price.