4 Great Dollar-Gold-Oil Plays

07/14/2011 11:30 am EST


Michael Murphy

Former Editor, New World Investor

While Europe still has to sort out its mess, the ensuing move to the dollar means it’s still a good time to buy some high octane gold and energy plays, say Michael Murphy of New World Investor.

Gold is about in the middle of the timing window for an intermediate bottom. I expected the intermediate bottom to come later, and it still may.

If the US dollar was plunging, I would have no doubt this move is real. But the dollar remains stable, and there is enough chaos simmering just beneath the surface in Europe to think the dollar really did hit its three-year bottom in May. If so, it will be hard for gold to rally while the dollar is gong up.

If Europe was openly falling apart, it is possible both the dollar and gold would rally together, as happened early in 2010 when the Greek debt worries surfaced.

But the European Union, the European Central Bank, and the International Monetary Fund have kicked the Greek can a ways down the road, and they have some time until Portugal has a bigger problem and Spain or Ireland blow up. So I don’t see a weak euro immediately ahead to support a strong dollar.

We will watch the retracements in the dollar and gold to see where they find support, and then decide if the lows are in, or if this is a head fake to suck in the gold bulls before dropping to a bottom around $1,425, while the dollar hits a short-term peak.

Golden Predator (Toronto: GPD)
The miner recently released data on the final five core holes from the winter 2011 drill program at the Carlos Zone in the Grew Creek project. They found significant mineralization in four of the five holes, including 92 meters of 2.02 grams of gold per ton, beginning at a depth of 60 meters in one hole.

A second hole showed 104.2 meters of 1.68 grams of gold per ton from a depth of 42.7 meters. A third hole found 104 meters of 1.33 grams of gold per ton beginning at 130.9 meters.

The total program was 4,317 meters of drilling in 20 holes, and will support a new 43-101 resource report.

The company also recently announced some new assay results from Brewery Creek, where 12 of the 17 holes hit significant mineralization. They’ve extended the strike to one kilometer, and it remains open.

Golden Predator is a top buy under $1, for a first target price of $2 in 2011. [GPD just climbed above $1 after press time, and sits at $1.07—Editor.]

Axion Power (AXPW)
The company received a notice that a epartment of Energy grant decision will be delayed to August 15, due to their workload. The company is engaged in developing an energy-storage device that’s a battery-supercapacitor hybrid.

It also focuses on developing its carbon technology for use in a variety of applications, including motive power, stationary power, hybrid-electric vehicles, and military applications.

Axion Power is a buy under $1. My 2012 target is $1.50, and I think this will be a ten-bagger over the next few years. [Shares were trading at 65 cents just before closing on Wednesday—Editor.]

Connacher Oil & Gas (Toronto: CLL)
The driller updated its conventional oil resources play—an area I consider much less important than the oil sands, but it is growing. After acquiring more land this week, they now have a 100% working interest in over 24,000 acres.

They have a drill rig on site and three more wells licensed to drill this year. Production is up to 1,000 barrels a day.

Connacher is a top-value play under $3. It can get to $5 in 2011 and to my $9 target in 2012. [The stock sold for just $1.04 as of this writing—Editor.]

Petrohawk Energy (HK)
This company will benefit from rising coal prices following anti-nuclear sentiment after the Fukushima disaster. Rising coal prices make natural gas relatively cheaper, and many utilities can switch between the two, and will.

HK is a top buy under $22.50, and I have a $50 target for 2011. [Shares were in the $25-$26 zone last week, but have retreated under $24 and could reach the buy zone soon—Editor.]

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