The Real Treasure Trove In Gold
The Money’s Not In Gold. It’s In Gold Mining
Year-to-date, gold mining stocks in general are up 30%-plus.
In short, if you’re looking for leverage to the gold price, Seabridge Gold SA is your best opportunity.
With Seabridge Gold, you not only get a share of their gold deposit, which grows in value as gold goes up in price, but you also get ongoing growth in the amount of gold you own. Because unlike every other gold company on the planet, Seabridge has grown its gold ownership per share every year for the last 15 years. That’s our business model… increasing gold ownership per share.
Therefore, Seabridge has a history of dramatically outperforming the price of gold when gold goes up… and dramatically underperforming when gold goes down.
There are many other gold mining stocks that are great buys today.
Debbie Carlson from USNews break it down for us:
A gold price rally has some investors thinking it might finally be time to start looking at gold mining stocks.
Gold prices are just off two-month highs, outperforming commodity and financial markets in 2016 as fears about China’s stock market and its economy sent shock waves across global financial markets, hitting U.S. stock markets.
The yellow metal’s rise to around $1,100 an ounce comes after a few years of losses. Prices fell about 43 percent from their 2011 peak of over $1,900 an ounce – a nominal record high. Additionally, the Philadelphia Gold and Silver Index (ticker: XAU), an index of 30 precious-metals miners, slid about 82 percent from its 2010 peak. But with the current strength, some gold-market watchers said 2016 might be the year prices are bottoming, and gold miners might be at least worth a look.
“What’s impressed me the most is that gold has not fallen apart with the decline in oil,” says Frank Holmes, chief executive officer and chief investment officer of San Antonio-based U.S. Global Investors.
West Texas Intermediate crude-oil values dipped under $30 a barrel to 12-year lows this year, dragging down other commodities, except gold, on concerns about global demand, especially from China. These geopolitical factors renewed gold’s status as a safe haven in turbulent times. These factors can be transient, though, and when they subside, gold prices can retreat.
That’s happened a little bit with gold, but the metal is also holding above its 2015 lows around $1,045, which is why some market watchers think gold might be trying to finally stabilize. That could be good news for beleaguered gold mining stocks, too.
But don’t let gold’s 2016 glimmer become too blinding. While a few analysts are turning a little more neutral, there are still plenty of people who remain negative on the price outlook. Headwinds for the metal remain, such as U.S. dollar strength and the possibility of the Federal Reserve further hiking interest rates this year.
Will gold stabilize or sink further? Adrian Day, chairman and chief executive officer of Adrian Day Asset Management in Annapolis, Maryland, says he believes gold prices are stabilizing and will slowly turn higher. He notes after gold’s rally in the 1970s, prices declined 47 percent.
“The [current] decline in percentage terms is not so great. More significant is that it’s gone on for four years. It just takes time to turn. … You have people who are nervous, people who bought before, people who buy and get a $100 rally and say that’s good enough,” he says.
There are forecasts for lower prices. In 2015, gold fell to a low of around $1,045, its weakest price since 2009. Barclays analysts peg their 2016 average price at $1,054, and analysts at Natixis have a base price forecast of $970. Both say the pace of Federal Reserve rate hikes will direct gold’s path this year.
Erica Rannestad, Chicago-based senior analyst with the GFMS team at Thomson Reuters, which produces commodities research and forecasts, says while GFMS sees gold prices rising in the second half of the year, be cautious about the current strength.
“It’s hard to decide if the strength is a result of the January effect or something different,” she says, noting that historically, gold prices usually rise in January.
Its 2016 average price forecast is $1,164, but she notes its fourth quarter average price call is $1,280, based on ideas that the Fed will slow the pace of rate hikes.
Gold stocks to watch. Although gold prices are up, stock performance for gold miners has been mixed for 2016, as a higher gold price is only one consideration for miners.
Both Holmes and Day say that while the U.S. dollar rally hurt the gold price, it’s helped some gold-mining firms with operations outside the U.S. Many of these firms’ costs are in their local currency, but they can sell their production in dollars, and that’s helped offset the decline in the gold price. A drop in oil prices has also helped.
Their top pick for a gold stock is Toronto-based Franco-Nevada Corp. (FNV), which they say they both own. Franco-Nevada is a royalty company that provides money upfront to gold miners to help bring the mine to production. The company receives royalty payments on future output.
“They’re a first-class company. Why buy Barrick (Gold Corp, ABX) or Newmont (NEM), when you can buy Franco?” Holmes says.
Day says Canadian miner Agnico Eagle Mines (AEM) and Channel Island-based Randgold Resources (GOLD) are two other favorites.
The precipitous drop in gold prices led many firms to cancel new projects and reduce spending on exploration. Rannestad says gold supplies from mining likely peaked last year, and GFMS forecasts a 4 percent decline in global gold-mine output for 2016.
“GFMS forecasts a long-term decline in mine production going forward and sees a chronic reduction in mine output, which will get the fundamentals to reassert themselves. But this is a long-term effect. It won’t have an immediate impact … [It’s] increased justification for higher gold prices going forward,” she says.
Considering it can take around 15 years for mines to come into production from first discovery, that can support both gold prices and gold miner stocks if metal supplies fall, Day and Holmes say.
Day cautions would-be investors to look at corporate balance sheets of gold miners if metal prices rise. A strong move up in gold can cause the miners with the most debt and highest cost of production to see their stock values rally the most.
“A small move in the price [of gold] makes a big difference if your cost of production is marginal,” he says. “If you produce gold at $600, your profit doesn’t go up much if gold moves from $1,100 to $1,200. But it makes a huge difference if your cost of production is $1,150.”
Latest Update On Oil – Expected to Settle Between $45 and…
“Oil is going to a new price point because of the revolution in production,” said Bill Perkins, chief investment officer of energy-focused hedge fund firm Skylar Capital Management. Perkins believes the price of crude could fall as low as $45 a barrel. He is personally short, a bet that the price of the commodity will drop. He believes oil will settle between $45 and $80 a barrel in the next year.
“Companies are harnessing amazing new technology to destroy the traditional energy value chain,” Perkins said. “There’s a lot of money to be made on that.” “U.S. energy names remain a significant net exposure for equity long/short managers who added longs and cut shorts after October’s trough,” the report said. “If pressed, one could interpret this positioning as bullish for energy stocks.”
Andurand thinks crude might hit $50 a barrel within the half-moon of 2015 and so rebound to a high of $70 within the fourth quarter. He also said the oil market is oversupplied by between 1.5 and a couple of million barrels per day, given weak demand, low disruptions to produce and enhanced production by nations that do not belong to the Organization of the oil mercantilism Countries.
“OPEC is not the swing producer anymore. U.S. shale oil producers are, but will take more time to react to prices than OPEC—it is a game changer that will lead to more volatile prices and bigger price ranges,” he added.
Morgan Stanley aforesaid the worth would wish to fall as low as $35 or $40 a barrel to prevent production and rebalance provides.
Still, the bank noted that the worth can doubtless rise eventually.
“Oversupply is probably going exaggerated and therefore the market is also content regarding side risks,” the report aforesaid.
Investing in Energy Markets Part 2: Oil, Gas and Energy
It’s no secret that the energy industry is very profitable, with oil and gas making up 80% of the market.
Thus, these two resources attract the most people. They are the best energy investment resources due to high demand and wide range of options. However, with energy scares fresh in our recent memory and the climate change movement greatly affecting energy policy, new alternatives are constantly being sought.
Everything that we do requires some type of energy. As a result, the price of energy affects the going rate for other commodities as well. When the price of oil increases, the price of transporting goods goes up as well.
That is why the cost of milk fluctuates and why your favorite imported coffee beans are more expensive than Folgers. Factors that contribute to these prices include geopolitics and natural disasters, but can never truly be accounted for in full. That is one of the underlying points to understand and accept about energy markets. Something can always go wrong. Typically, it doesn’t, but when it does things can get hairy and fast.
TYPES OF ENERGY SECTORS: That could affect your Household
Nuclear Nuclear power actually produces 1/10th of the world’s power, without emitting carbon. The United States and China have roughly 75% of the world’s nuclear plants with India and Russia also tapping into the market.
“Green” and renewable energy companies You can invest in different companies that place an emphasis on renewable resources by using the stock market. This option is optimal for investors who like the idea of green technology but do not now want to run the risk of investing in developing companies directly. This market has always been tricky from an investment perspective due to volatility. If you have an appetite for risk, however, this is a good place to look.
Modern Energy (solar, wind, geothermal, transportation, efficiency) Modern energy is made up of three major components or categories. They are wind, solar and biomass. The renewable sector is expanding at a rapid rate. We have witnessed a steady employment increase in the energy sector since 2011 with no end in sight. All types of investors and speculators are flocking to the natural resource markets in attempts to get out ahead of the renewable energy trend that could be the way of the future.
Big Oil In 2010, the world market for oil witnessed an incredible increase of 32%, to over $2,100 billion. According to estimations of oil segment professionals, the market’s value will hit $2,683 billion in 2015. The competitiveness of the global market of the crude oil is explained by its limited resources and mankind’s insatiable appetite for growth. This factor should not be disregarded easily. Our desire for more explains the majority of the energy marketplace.
Gas sector The market of natural gas reached $18.5 billion by the end of 2011. Demand for gas has recovered to match and surpass pre-recession levels. The US prices for gas are half of those in Asian countries and the EU. Gas demand decreased 3% in 2009, but at present is on the rise.
Electricity Buying the stock of electricity companies is the preferred way of entering this marketplace. The majority of the participation in electricity markets, however, takes place in the futures markets. Since power companies are constantly projecting and calibrating their loads, the futures market is the only place where investors with this sort of risk profile will feel that they belong.
Coal Many non-coal energy sectors directly depend on the performance of coal because burning coal has been proven to produce enough energy to support high demand. Due to recent regulations in the US by the Environmental Protection Agency, coal has taken a minor hit, but until a massive, institutionalized adoption of newer technology, it is highly unlikely coal will be going anywhere for the foreseeable future. In other words, coal is very much a barometer for this market. Though it is unlikely to happen any time soon, a massive dip in coal production would likely signal the emergence of a new viable energy source.
Hydro Hydropower energy is still very limited but there has been over $75 billion in investments pledged to R&D before the year 2020. There are some companies worth checking into, but for now this is very much a long term play.
Energy Funds These funds are established with companies related to the energy field. Be aware that some energy funds are more successful than others and produce a higher return than others. Often times, the energy funds are established to diversify various portfolios and minimize risk.
Oil Prices Surge As OPEC Members Agree To Cut Production
The Organization of the Petroleum Exporting Countries (OPEC) took its first action in years to cut production on Wednesday in hopes of lifting oil prices. How big a cut did the cartel agree to? Will it really make a difference?
OPEC Members Agree To Cut Oil Production
Oil had its biggest day in more than five months as prices rose 5.3 percent. This action came after OPEC members agreed they could limit oil production – in November. While there are a lot of maybes, this is a big step forward for oil. But will it actually work?
While OPEC members agreed at a meeting Wednesday in Algeria that a production cut is needed to lift oil prices, plans for the supply cut won’t be finalized until November. Barrel output will go from 33.25 million barrels per day to 32.5-33 million barrels per day. A lot can go wrong between now and November, but for now investors love the news.
Many analysts, however, are not as optimistic.
This isn’t the first time this year OPEC has tried to cut oil supply. The committee met in April, but talks fell apart when Iran would not join the talks. In addition to that, all the OPEC countries compete against each other and the U.S. for market share. Several OPEC members, Iran, Libya, and Nigeria, all want to increase oil supply. Throw into the mix the political tensions of the group and this agreement seems very delicate.
Yet, there is a positive feeling about “this time”. Members are hoping that things are more conducive to getting a deal done. Many of the largest producers are close to maxing out capacity, so lowering output slightly wouldn’t be too much of a stretch. Additionally, Saudi Arabia and Iran are feeling pressure domestically from the drop in oil prices, and thus be willing to put aside differences to improve their finances.
Wonder why OPEC needs to cut production? Check the news here with CNNMoney!
For now, trading oil is a smart play. Exxon Mobil Corp. (XOM) rose 4.40% on the news. Chevron Corp. (CVX) rose 3.20%. Energy companies and oil shares will go up until november, and then take their cues based on that meeting.
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