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Growth Report Free
growthreport.com
Volume 4, Issue 90
December 1, 2004
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Golden Opportunities?
Investors suddenly have a variety of choices through which they can bet on the price of gold carrying us through tough times.
Gold. The anti-dollar. The shiny yellow metal that used to mean something until it lost its luster after massive inflationary shocks of the 1970’s may finally be making a comeback. Not merely in terms of price appreciation – the price of gold has certainly had its ups and downs this year – but in terms of trading instruments that now track the precious metal.
In fact, if investors (and finance ministers) are growing increasingly worried about the falling dollar, and are thinking of turning to the safety and security of gold, there are now some very interesting trading options. It’s not just gold stocks or precious metals futures markets anymore. Exchange-traded funds (ETFs), tracking investments that look a bit like commodities but trade like stocks, now also allow investors to go long (or short) their interest in gold.
And ETFs are growing faster than you can spell US d-e-f-i-c-i-t-s. The first gold bullion ETF, StreetTracks Gold Trust (NYSE: GLD), was launched on November 18, 2004 and attracted $1.3 billion in assets in its first three days of trading. (That’s just a fraction of the $180 billion in total ETF assets that now track domestic and international stocks, US bonds and gold. ETFs could also soon track currencies, oil, precious metals and a range of other natural resource commodities.)
Beyond ETFs, however, more and more gold mining stocks that have traditionally served as hedges against the falling dollar, have equally garnered investor enthusiasm. Companies including former Growth Report holdings Newmont Mining (NYSE: NEM) and Placer Dome (NYSE: PDG), and others including Glamis Gold (NYSE: GLG), Goldcorp (NYSE: GG), Harmony Gold (NYSE: HMY), Bema Gold (NYSE: BMO), and Meridian Gold (NYSE: MDG) offer investors equity opportunities to take advantage of rising gold prices -- though rising energy, exploration and mining costs must also be factored into the equation before seeing these stocks as sure bets.
Newmont Mining, for example, reported stellar third quarter earnings up 12.5 percent from a year ago, netting the company $128.7 million or 29 cents per share. However, the cost to Newmont of producing gold rose to an average of $233 per ounce versus $201 per ounce a year earlier – implying that even a 10 percent increase in the price of gold during the quarter (Newmont sold its gold at an average of $404 per ounce during Q3) couldn’t yield much more than a corresponding 12 percent increase in earnings.
For investors a bit more daring and experimental, there is also a new online retail derivatives exchange called HedgeStreet.com where hedgers and speculators trade based on whether they feel gold will achieve a certain price per ounce by a certain date. Similar to how gold futures are traded on the commodity exchange in New York, HedgeStreet aims to bring derivatives trading to the masses, allowing investors to open accounts with far less money, and trade with far less risk, than they ever have before.
Such new trading options for investors, combined with ETFs and traditional gold mining stocks, offer further good news for gold speculators in times of global economic uncertainty. Even Robert McTeer, President of the Dallas Federal Reserve President, recently warned that, “Over time, there’s only one way for the dollar to go – lower.” And as the dollar continues to head lower, gold will surely to head higher.
Peter D. Henig
Market Columnist
Growth Report |
