Global Market Commentary, Analysis and Investments
Global investors had to muster the courage to keep calm as news of Cyprus’ proposed partial theft of all bank deposits took Wall Street by surprise, closed the country’s banks and drove the price of gold higher.
The thoughtless idea was intended to capture a portion of the $31 billion in bank assets held by Russians. According to The Financial Times, Cyprus has developed a “well-earned reputation for being a haven for dirty money from Russia.”
[Read more...]Gold’s bull market may or may not be over, but gold miners are sure acting like it is. Emerging-market investors can find opportunity amid the carnage by understanding the transformation taking place.
It’s been a tough year for gold—and gold miners. The precious metal has dropped 5.6% in 2013, while the Market Vectors Gold Miners exchange-traded fund (GDX) is off 19%. Among the worst performers are companies based in developing markets, including South Africa’s Harmony Gold Mining (HMY), which has plunged 31% this year, and Peru’s Buenaventura Mining (BVN), which has plummeted 29%.
They don’t ring bells at the top or bottom, but this smells like one. The fundamentals for gold (GLD) are only getting stronger by the month, and our opinion is that the Gold Mining sector (GDX) has been so beat up that it has just about no choice but to have a strong counter-trend rally that may have already began.
Few exchange-traded investments have visited more pain on shareholders in recent years than bullion stocks. Even now, amidst a spectacular surge in the broad averages, gold and silver mining shares have done little better than languish, making the pain even more acute for long-term precious-metal bulls. Is it time to bail out of them? We think not, even though it looks like two popular mining vehicles, GDX and GDXJ, may have further to fall before they hit bottom.
Gold stocks followed the yellow metal on Friday. Gold prices were down after data showed a much higher-than-projected increase for nonfarm payrolls. The report disclosed that the economy added 236,000 jobs in February and the jobless level declined to 7.7%, the lowest level not seen since Dec. 2008. Economists were expecting gains of 160,000. Later, the precious metal trimmed losses after the major U.S. equity markets pulled back from their highs.
Every year since 2007, bank and brokerage analysts have as a group predicted that gold would fall, sometimes dramatically, over the next four-year period. That’s not merely bad advice; that’s flawlessly bad advice.
Bank and brokerage analysts certainly know their sectors. But when it comes to helping you make an informed decision about where the gold market is headed, they have “a record unblemished by success,” as resource stock expert, Rick Rule, is fond of saying.
[Read more...]The JSE rallied to a two-week intraday high on Thursday, boosted mainly by a recovery in gold stocks following a 19% drop in sector in the year to date.
The rand weakened against all major currencies, boosting dual-listed stocks such as luxury goods maker, Richemont.
At 12.44pm, the JSE all share index was up 0.72% to 40,727.09 points, with the top 40 index gaining a similar margin. The gold and resource indices rallied 6.57% and 1.26% respectively.
This week, the ratings of 18 Metals and Mining stocks on Portfolio Grader are down. Each of these rates a “D” (“sell”) or “F” overall (“strong sell”).
Allied Nevada Gold (AMEX:ANV) earns an F (“strong sell”) this week, moving down from last week’s grade of D (“sell”). Allied Nevada Gold engages in the evaluation, acquisition, exploration, and advancement of gold exploration and development projects. In Portfolio Grader’s specific subcategories of Earnings Momentum, Earnings Revisions, and Earnings Surprise, ANV also gets an F. The stock’s trailing PE Ratio is 39.30.
Goldman Sachs GS +0.63% joined a parade of analysts and investors who have become more pessimistic on gold’s short- and long-term prospects.
In a note to clients, Goldman slashed its 2013 gold price forecast to $1600 an ounce from $1810 an ounce amid a gradual increase in U.S. interest rates, a slowly improving U.S. economy and more hawkish interpretations of the Fed’s stimulus measures. The firm had previously forecasted a turn lower in gold during the second half of the year, but recent developments have prompted it to move forward its earlier projections.
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Every Gold Coin Has Two Sides
Just as every coin has two sides, every data point that doesn’t meet expectations usually has an upside somewhere. For instance, although the gold price has fallen with the strengthening U.S. dollar, the yellow metal is appreciating in Japanese yen. So when negative news about the economy came out last week, along with the U.S. Labor Department reporting that the country added only 88,000 jobs in March, investors found reasons to be encouraged.
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