GOLDIGER,
Here is a read for you:
Will Gold Eventually Prove That
Every Dog Has Its Day?
Investors shun gold even in the face of chaos
Herb Greenberg
Even with yesterday's worldwide collapse of stocks, the price of gold barely budged, rising a little
more than $1 to around $324 per ounce.
Gold is so cheap that Royal Oak Mines, a Washington state gold producer, issued a press release earlier this week saying that its stock trades at a 46 percent discount to the value of just one of its four mines. Yesterday it closed at $2.50, up 6 cents.
If nothing else, according to one frustrated gold bull, the stock's slump shows how poor sentiment is
for gold, ''just as inflation is modestly turning up and foreign currencies are in disarray.'' Let's not forget, gold used to be considered a hedge against inflation and uncertainty.
In fact, in recent years gold has brushed off nearly every event that typically would have brought it
back into favor -- such as the Iran/Iraq war, the near collapse of Britain's Barings Plc bank, the Mexican currency crisis and even the Orange County financial fiasco.
With the precious metal doing so poorly, why would anybody still own it? Speaking for himself, money manager Ed Levy, of Levy Harkins in New York, views it as just another asset that
has been so discredited, and is so cheap, that it can't help but shine again.
Sound familiar? A few years ago nobody wanted California real estate. There was a time not long ago that nobody would get near an oil driller. And at times in the 1970s, there was widespread
sentiment that stocks were dead. Just as nobody could predict when those assets would be rediscovered, Levy jokes that gold will start to run ''when all of us who own it run out of patience,''
he jokes. ''And what's going to drive it is nothing. It'll happen in a vacuum, because everything that should have already made it go up has already happened.''
The gold story is particularly compelling, as it has been for years, when you consider that a tiny percentage of all mutual fund holdings are in gold-related stocks. Imagine what would happen if jittery stock-fund managers decided they needed to increase their exposure to gold just to have something to cling to in the event stocks continue to slide.
Consider that the largest of all gold companies, Barrick Gold Corp., has a market value of
$8.8 billion and $218 million in earnings. It also pays a small dividend. By contrast, America
Online's market value is $8.9 billion, has no earnings and pays no dividend.
Any guess which one has less downside risk?
* * * * * * * * * * *
In my view, BCMD has even less downside risk than Barrick at this time. A spring is being built for gold, soon all the weak holders will have sold. Sorry for the long post, but you BCMD'ers sleeping in are to blame <grin>
Roebear |
