•
INVESTMENT
POSITIVE:
- Exploration
budgets increasing,
- Financing
widely available and
- Low interest rates
- Increasing
M & A
NEGATIVE:
- Labor
unrest and cost rising,
- Energy
costs are high
- Higher
royalties and taxes,
- Increasing
resource nationalization and expropriation threats.
THREE VIEWS OF GOLD over next year*
1.
Range bound $1500 to $2050
2.
RALLY to $2000 - $3000
3.
Return to VALUE: $1430*
- •Hold
Gold as a hedge.
- •Gold
remains cheap insurance against both declining US dollar and
inflation.
- Gold
and precious metals can perform well in either an inflationary
or deflationary environment.
- •Strong
Investment Demand is driving precious metals. But remember: Investors
can become fickle. Remember how quickly Oil dropped from $147 to $38?
Silver bugs especially beware!
Today (July 21) gold stocks are discounting gold
prices 25% below current spot ($1160-$1190).** Think about
that!
This is one key reason we prefer gold stocks to gold and silver stocks to
silver. We use a base line calculation for our valuation of precious metals stocks (currently
Gold $1280 and Silver $18). Then we calculate cash flow. Obviously if PM
prices are higher, this would all be gravy for a value investor.
* Thanks to the August Fed
meeting, gold's range was increased from $1500 to $1800 to $1500 to
$2000. FV increased from $1280 (7/21/2011) to $1380.
Thanks to the January 25, 2012 FED pledge to keep US interest
rates low until 2014, FV inceased again to $1425.
** Some analysts use a higher $1400 gold figure.
We did finally see P1
of our gold investing December 29, 2011 with the GDXJ ~22.
Our Fair Value for
Gold in Q1 2012 is $1404. GDXJ at 18-22 is a long term buy and hold; GDX at
44-48. That will be true for many of the higher quality precious metals
stocks. While we are close to finally (like 2010 and before) buy and hold, we
are NOT forecasting major gold moves- although it is always possible and a good
hedge. Think of gold companies as cash flow manufacturers and juniors as biotech
or technology discoveries plays. More on this as time goes
by.
TRADING
There will be plenty of short term and daily trading opportunities, long and short ahead!
On the positive side Gold has seasonality and positive momemtum going
into Q1 2012. However, from a valuation side, it is overvalued
20%. While that doesn't always matter in short term trading, I
usually prefer the "hard way" - to sell Resistance than buy Support
more often than not. However, should Ben announce QE3, then that
easily could add another $50-$100 to gold's valuation in the blink
of an eye: cf his January 25, 2012 pronouncement.
Previously Gold
Trading Targets arrived earlier and revised higher. However, in Q2 2012, they may be revised lower.
2012 GOLD TRADING RANGE $1430 to $2170.
2012 SILVER TRADING TARGET $21-$28 or lower.
Gold and Silver
continue to often trade somewhat irrationally e.g. I believe gold should RISE on Euro
problems not fall! Be that as it may,in Q1 2012, we
will buy AND sell the precious metals.
We repeat on a long
term investing basis, however, many small and midcap gold stocks are undervalued
while some energy ones are very fairly valued.
For the former, we are
ideally are looking to a repeat of GDXJ 22 (to 18) buys, for the latter Oil at or under $85.