Dollar the underlying tide in gold price performance
A re-emphasis that the gold price is primarily dependent on the intrinsic value of the U.S. dollar and moves like waves on a seashore around an incoming, or outgoing tide.
Author: Julian Phillips
Posted: Wednesday , 28 Mar 2012
BENONI -
Perception makes prices not realities in the very short-term and traders in the developed markets of the world decide the short-term level of prices. In the past we have used an analogy of the seashore to describe this situation. The currents and the tides are the deciding factors on whether there is a flowing or ebb tide and current. But on the seashore itself this is difficult to see except by looking at the waterline. Waves go in and out some further than others irrespective of the direction of the tide. Now add to this the wind, which can whip up the size of the waves and the surf. Add some spray and you can see a furious display by the waves, but they remain under the dominance of the tides, no matter how furious they get. Such is the gold market.
The news that Fed Chairman Mr. Ben Bernanke will keep accommodative policies in place to further encourage the recovery sparked the latest surge in the gold price in New York but as we have said many times before, the state of the U.S. economy is not a major fundamental factor in the gold price. It is the state of the U.S. dollar in terms of value and structure that remains the underlying tide in the gold price, together with demand from the emerging world.
In India the jewelers strike is on again as they object to the government's duty hikes. The recent move to reduce tariff value has been termed an infinitesimal gesture. Over the weekend, the Indian government has reduced the import tariff value of gold by 7.50%. Though the announcement was made through a notification from the Ministry of Finance, the small reduction will not counter the impact of increased customs duty.
History shows that the government eventually backs off their position because the gold market is far more that just a gold market. It is a fundamental aspect of Indian financial life with strong doses of religion and family thrown in. This means it affects votes. We expect the government to again back track on its position.
Juliam Phillips for the Gold and Silver Forecasters - www.gtoldforecaster.com and www.silverforecaster.com
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March 28, 2012
Is The Coup In #Mali Creating A Contrarian Buying Opportunity For #Gold Stocks? - Seeking Alpha
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Is The Coup In Mali Creating A Contrarian Buying Opportunity For Gold Stocks?
A big piece of news likely to be of interest to those investing in gold stocks is the coup that is ocurring in Mali. The EU has responded by suspending development operations; likewise, the US has cut off aid until what it deems is a democratic government is restored. China has condemned the coup as well. Basically, no one is a fan.
Which of course begs the question: is this a contrarian buying opportunity? Major miners with significant operations in Mali -- namely Randgold (GOLD), AngloGold Ashanti (AU), IAMGOLD (IAG), and Gold Fields Limited (GFI) -- have sold off a bit following the advent of the Mali coup. Randgold, a company with a market cap of $8 billion, positive earnings, and dividends, had a particularly strong sell-off; it managed to fall over 17% in the past week.
For what it's worth, these firms in Mali remain committed, and say the coup is not affecting their operations and there is no cause for concern. I'm not inclined to believe them here, and think they are understandably just trying to allay shareholder concern and preserve confidence in their operations. I'm bullish on Africa as a whole, but this is primarily because I view China as the smart money that will push opportunities in Africa up. From this perspective, if China is not supportive, I grow much more concerned about the ability of value to be created and price to rise accordingly. With that said, if there is a really, really strong sell-off, I may look to buy; some of these stocks, like AngloGold, are trading at a P/E of just above 10 and have a dividend yield of 2.73%. If price can fall by at least another 30% without any impact in earnings, I may find the opportunity to be sufficiently cheap. But thus far the coup in Mali has not provided an opportunity I would regard as particularly worthwhile for contrarian buyers. And given that stocks have done quite well thus far in 2012, I think any additional buying, especially for those who are already reasonably well-positioned in stocks, should be done with extra caution.
So while I'm generally not that interested in a contrarian opportunity in Mali at this time, there is one exception: Merrex Gold (MXGIF.PK). Merrex has a market cap of under $30 million, so we're dealing with an especially tiny stock here. IAMGOLD is a major partner of the firm on some of their operations and has a 15% stake as well. The NI 43-101 report for its Siribaya Project claims over 316,000 ounces at 3.31 grams per ton -- an especially high grade, in my opinion, which I regard as a sign that its final cost per ounce produced may be low enough to yield exceptional profit margins. With this project (in addition to others), IAMGOLD's support, and its low market cap, I think this is a particularly worthwhile opportunity. It should be noted that the stock has not really declined since the start of the Mali coup, and it is still close to its 52 week low; it's currently trading at around $0.24, while its 52 week low is at $0.20. That the stock is not reacting negatively to this news suggests me to the bottom is in, and if it can deliver on its promising exploration efforts with the assistance of a major partner like IAMGOLD, shareholders could be in for some great returns.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
See the article online here: Is The Coup In Mali Creating A Contrarian Buying Opportunity For Gold Stocks? - Seeking Alpha
A big piece of news likely to be of interest to those investing in gold stocks is the coup that is ocurring in Mali. The EU has responded by suspending development operations; likewise, the US has cut off aid until what it deems is a democratic government is restored. China has condemned the coup as well. Basically, no one is a fan.
Which of course begs the question: is this a contrarian buying opportunity? Major miners with significant operations in Mali -- namely Randgold (GOLD), AngloGold Ashanti (AU), IAMGOLD (IAG), and Gold Fields Limited (GFI) -- have sold off a bit following the advent of the Mali coup. Randgold, a company with a market cap of $8 billion, positive earnings, and dividends, had a particularly strong sell-off; it managed to fall over 17% in the past week.
For what it's worth, these firms in Mali remain committed, and say the coup is not affecting their operations and there is no cause for concern. I'm not inclined to believe them here, and think they are understandably just trying to allay shareholder concern and preserve confidence in their operations. I'm bullish on Africa as a whole, but this is primarily because I view China as the smart money that will push opportunities in Africa up. From this perspective, if China is not supportive, I grow much more concerned about the ability of value to be created and price to rise accordingly. With that said, if there is a really, really strong sell-off, I may look to buy; some of these stocks, like AngloGold, are trading at a P/E of just above 10 and have a dividend yield of 2.73%. If price can fall by at least another 30% without any impact in earnings, I may find the opportunity to be sufficiently cheap. But thus far the coup in Mali has not provided an opportunity I would regard as particularly worthwhile for contrarian buyers. And given that stocks have done quite well thus far in 2012, I think any additional buying, especially for those who are already reasonably well-positioned in stocks, should be done with extra caution.
So while I'm generally not that interested in a contrarian opportunity in Mali at this time, there is one exception: Merrex Gold (MXGIF.PK). Merrex has a market cap of under $30 million, so we're dealing with an especially tiny stock here. IAMGOLD is a major partner of the firm on some of their operations and has a 15% stake as well. The NI 43-101 report for its Siribaya Project claims over 316,000 ounces at 3.31 grams per ton -- an especially high grade, in my opinion, which I regard as a sign that its final cost per ounce produced may be low enough to yield exceptional profit margins. With this project (in addition to others), IAMGOLD's support, and its low market cap, I think this is a particularly worthwhile opportunity. It should be noted that the stock has not really declined since the start of the Mali coup, and it is still close to its 52 week low; it's currently trading at around $0.24, while its 52 week low is at $0.20. That the stock is not reacting negatively to this news suggests me to the bottom is in, and if it can deliver on its promising exploration efforts with the assistance of a major partner like IAMGOLD, shareholders could be in for some great returns.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
See the article online here: Is The Coup In Mali Creating A Contrarian Buying Opportunity For Gold Stocks? - Seeking Alpha
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