A number of leading advisors recommend positions in gold and other metals for several reasons, including a hedge against dollar weakness, a safe haven to protect against geopolitical risks, a play on favorable supply and demand fundamentals, and a speculation on rising metal prices. Here are some of their picks.
"It should come as no surprise to find that last week's sector
mutual fund leaders were in commodity-related groups like gold and industrial
materials," notes John Murphy, editor of
stockharts.com. "Recently, we have seen a number of
individual stocks in this area breaking out to new 52-week highs that included
chemicals, copper, and gold. With both gold indexes that we follow -- the XAU
Index and the HUI Index -- hitting 52-week highs, it's not surprise to see gold
funds in the week's top spot. Fidelity Select Gold (FSAGX) moved up
to challenge the highs of the past two years. The formation looks like an
'ascending triangle' which is a bullish pattern. On relative strength grounds,
gold stocks are turning up as well. Gold remains our number one sector
pick."
"Freeport McMoRan Copper & Gold 7 Percent Series A (FCX-A NYSE) is convertible into common shares of the
parent company," notes Roger Conrad in Personal Finance
. "As Freeport's CCC rating attests, its finances are hardly blue chip.
Freeport is the world's lowest-cost copper producer. And though its
primary operations are in Indonesia, a volatile place to do business, its
fortunes are on the rise. The preferred is convertible into 0.835 shares of
Freeport Common (FCX NYSE), a value of a little over 20 a
share currently. Don't buy above the 25 call price until the conversion value
rises to that level as well. But with a yield of over 7% and as a bet on gold
and copper, the Freeport preferreds are a buy for aggressive investors up to
25."
"ASA Ltd. (ASA NYSE) is
buy for those seeking to benefit from a gold bull market and rising earnings in
the sector," says Richard Rhodes, editor of The
Rhodes Report
. "The recent pattern from the January 3 highs at $43
is now confirmed as a bullish 'consolidation' as the declining trendline
was clearly broken. These levels were successfully tested, and we expect further
gains in the weeks ahead. All in all, price action is quite positive,
suggesting that the rally in the shares just may have long legs. We should allow
this trade to develop towards the early-2003 highs at $45, and
potentially upwards of trendline resistance at $49-$50 -- which is a very real
possibility."
"Don't be afraid to hold plain-vanilla cash at times; cash can
be comforting and reassuring," says Jim Dines, editor of
The Dines Letter. "Since 2000, patience and cash
have been repeatedly rewarded. In addition to our ongoing holdings in gold and
silver stocks, we have added a position in the world's largest uranium
producer, Cameco (CA:CCO Toronto). The company mines and sells uranium for the
nuclear generation of electricity. We are not afraid to hold this stock over the long
term, even if a bottom comes out of this market. The stock is a buy in our
long-term growth portfolio, which is designed for large capital gains, moderate
risk, with strong fundamentals."
"Newmont Mining (NEM NYSE) reported second quarter financial results;
revenue for the quarter was $747 million, 16% higher than the year ago quarter,"
notes Ian Wyatt's Growth Report. "Net income was $90.8
million or 22 cents per share, an increase of 35% over the second quarter of
2002. At the end of the quarter, Newmont has cash and cash equivalents of $275
million. Newmont remains a long-term holding. We believe this company represents
a long-term growth opportunity for investors who want some exposure to the gold
market. As a result of the significant profit growth, we are raising our rating
from a 'hold' to a 'buy', with a 12-month price target of
$40."
"We strongly believe that the long-term fundamentals for gold
are very positive," says Adrian Day, in his e-mail service,
Global Analyst. "
So this period will be a very opportune time to
accumulate the gold stocks, but selectively, on weakness, picking spots.
Other factors are positive for gold's longer term outlook.
Most importantly, is the basic macro-economic environment: low interest rates and an
expansionist monetary policy. Despite this positive long-term outlook, I suspect that
over the next few weeks or months, we may see lower prices. Given our near-term
caution, I currently have only one stock
listed as a buy - Virginia Gold
(CA:VIA Toronto), which is our favorite gold exploration
company."