The Gold Play to Buy Now
08/17/2012 11:30 am EST
This isn't coming from a gold bug: gold stocks are looking very attractive here, more so than many other sectors, says Curtis Hesler of Professional Timing Service.
In looking over my work for the last couple of months, I am forced to conclude that the best asset to own right now is gold. We have suffered through a long, drawn-out correction, but support levels have held up.
I am looking forward to higher prices through the end of the year and beyond; the worst is behind us. Meanwhile, the mining stocks are as cheap as you will likely see them ever again.
That does not mean there will be no more corrections, but I would be surprised if we encounter another adjustment this deep or extended. The ride from here should be more exciting, with prices gradually accelerating into an exponential rise, culminating with the ultimate high in the gold bull.
The time frame on that high is several years out, so don’t panic about missing that top. There will be some headwinds from $1,600 to $1,700; but as time goes on, prices will strengthen.
Longer term, I expect to see gold approach the $5,000 level at the top, but $2,000 is not out of the question yet this year. We could well see $2,500 within the next 12 months.
Not since the beginning of the gold bull have we seen the monthly slow stochastic on the popular gold mining averages as oversold as now. Any way you slice it, gold stocks are historically cheap compared to gold, and this is a rare opportunity if you have new investment dollars to commit.
During the next bull phase in gold, I fully expect the miners will outperform the metals (both gold and silver) handily. Bottom line, this is a good place to buy mining stocks, even if we were in a bear market.
In assessing our recommended list, Goldcorp (GG) comes bubbling to the top. They have been having some difficulties, but this perhaps gives us an advantage during the overall price weakness of late.
They announced that 2012 production would fall short of original estimates due to ongoing operational struggles at its two biggest mines—Red Lake mine in Ontario and the Penasquito mine in Mexico.
In the case of Red Lake, it is a safety problem. They are dealing with some rock anomalies that require an extra effort to ensure the safety of their miners. This is causing a delay in production and extra expense, but it is the responsible thing to do.
The gold is still there, however, and they will be digging it up and selling it at higher prices than we have today, so the delay might not be all that bad. Who can argue with the safety issue? This is a responsible company.
The Penasquito problem is due to delayed production, in turn due to a lack of water. This, too, is being addressed, and the effect is to forestall production of reserves that are still there. They will be extracted and sold at better prices than we have today.
If you are of a mind to buy Goldcorp, buy into weakness. I think Goldcorp is an excellent buy below $36 per share.