John Rawlins share some long-term plays in the commodity sector....
Forget Cryptocurrencies; Buy Gold
08/29/2017 2:51 am EST
Despite the tremendous rush into cryptocurrencies such as Bitcoin in recent years, in our view, gold remains the ultimate currency — the currency of last resort, asserts Alan Newman, editor of CrossCurrents.
There are now more than a hundred cryptocurrencies, which implies there is nearly no impediment to the creation of virtual coin.
Since the bar to creating virtual coin is ridiculously low, there is every reason to presume hundreds more will eventually be created, all of which will tend to debase the others, as well as debase the efforts of central banks to create their own monies.
Most importantly, in a world now dominated by computer transactions, the threats to the efficacy of virtual coin or reliance on virtual coin seem all too real.
Meanwhile, all the gold ever mined would fit into an Olympic swimming pool and is currently worth less than $7 trillion.
Despite all the mining operations worldwide, there is not all that much gold and obviously, all the gold that will ever be created has already been created.
For some years, we have viewed support for bullion's relationship to the Dow Industrial range of a ratio to fall to 5 to 5.67; such a ratio would eventually take gold as high as $4000 per ounce at the current level of the Dow.
Despite the nine year long bull market in stocks, the relationship between paper and hard assets peaked long ago. Bear in mind gold was only one-fifth its current level when a super bull market commenced on September 11, 2001.
Bullion has been in a prolonged consolidation phase after the huge run up and peak in 2011, and which extended further out in time for the Euro and Yen.
The performance of gold priced in U.S. dollars would still appear to be under some pressure but is belied by continuing up trends since the lows as measured by the Euro and Yen. Indeed, we remain in bullish mode and are interested in accumulating shares of selected miners.
One of our favorites over time have been and remains Newmont Mining (NEM); indeed, we have personally owned shares as far back as 1980 and since September 11, 2011 have always held a core position.
NEM is one of the largest miners, with over $7 billion in revenues and proven and probable gold reserves of 68.5 million ounces.
The stock's recent breakout was not accompanied by the kind of volume we would have hoped for and the February high is expected to provide resistance, thus we’d hope for a pullback to $35 at most to provide a better buy point.
Another favorite has been Iamgold (IAG). We would stress that IAG is a speculative issue with revenues of just over $1 billion. In our technical view, the charts for both are currently positive.
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