Best of the Week
Most Popular
1. Investing in a Bubble Mania Stock Market Trending Towards Financial Crisis 2.0 CRASH! - 9th Sep 21
2.Tech Stocks Bubble Valuations 2000 vs 2021 - 25th Sep 21
3.Stock Market FOMO Going into Crash Season - 8th Oct 21
4.Stock Market FOMO Hits September Brick Wall - Evergrande China's Lehman's Moment - 22nd Sep 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.How to Protect Your Self From a Stock Market CRASH / Bear Market? - 14th Oct 21
7.AI Stocks Portfolio Buying and Selling Levels Going Into Market Correction - 11th Oct 21
8.Why Silver Price Could Crash by 20%! - 5th Oct 21
9.Powell: Inflation Might Not Be Transitory, After All - 3rd Oct 21
10.Global Stock Markets Topped 60 Days Before the US Stocks Peaked - 23rd Sep 21
Last 7 days
Chinese Tech Stocks CCP Paranoia and Best AI Tech Stocks ETF - 26th Oct 21
Food Prices & Farm Inputs Getting Hard to Stomach - 26th Oct 21
Has Zillow’s Collapse Signaled A Warning For The Capital Markets? - 26th Oct 21
Dave Antrobus Welcomes Caribou to Award-Winning Group Inc & Co - 26th Oct 21
Stock Market New Intermediate uptrend - 26th Oct 21
Investing in Crypto Currencies With Both Eyes WIDE OPEN! - 25th Oct 21
Is Bitcoin a Better Inflation Hedge Than Gold? - 25th Oct 21
S&P 500 Stirs the Gold Pot - 25th Oct 21
Stock Market Against Bond Market Odds - 25th Oct 21
Inflation Consequences for the Stock Market, FED Balance Sheet - 24th Oct 21
To Be or Not to Be: How the Evergrande Crisis Can Affect Gold Price - 24th Oct 21
During a Market Mania, "no prudent professional is perceived to add value" - 24th Oct 21
Stock Market S&P500 Rallies Above $4400 – May Attempt To Advance To $4750~$4800 - 24th Oct 21
Inflation and the Crazy Crypto Markets - 23rd Oct 21
Easy PC Upgrades with Motherboard Combos - Overclockers UK Unboxing - MB, Memory and Ryzen 5600x CPU - 23rd Oct 21
Gold Mining Stocks Q3 2021 - 23rd Oct 21
Gold calmly continues cobbling its Handle, Miners lay in wait - 23rd Oct 21
US Economy Has Been in an Economic Depression Since 2008 - 22nd Oct 21
Extreme Ratios Point to Gold and Silver Price Readjustments - 22nd Oct 21
Bitcoin $100K or Ethereum $10K—which happens first? - 22nd Oct 21
This Isn’t Sci-Fi: How AI Is About To Disrupt This $11 Trillion Industry - 22nd Oct 21
Ravencoin RVN About to EXPLODE to NEW HIGHS! Last Chance to Buy Before it goes to the MOON! - 21st Oct 21
Stock Market Animal Spirits Returning - 21st Oct 21
Inflation Advances, and So Does Gold — Except That It Doesn’t - 21st Oct 21
Why A.I. Is About To Trigger The Next Great Medical Breakthrough - 21st Oct 21
Gold Price Slowly Going Nowhere - 20th Oct 21
Shocking Numbers Show Government Crowding Out Real Economy - 20th Oct 21
Crude Oil Is in the Fast Lane, But Where Is It Going? - 20th Oct 21
3 Tech Stocks That Could Change The World - 20th Oct 21
Best AI Tech Stocks ETF and Investment Trusts - 19th Oct 21
Gold Mining Stocks: Will Investors Dump the Laggards? - 19th Oct 21
The Most Exciting Medical Breakthrough Of The Decade? - 19th Oct 21
Prices Rising as New Dangers Point to Hard Assets - 19th Oct 21
It’s not just Copper; GYX indicated cyclical the whole time - 19th Oct 21
Chinese Tech Stocks CCP Paranoia, VIES - Variable Interest Entities - 19th Oct 21
Inflation Peaked Again, Right? - 19th Oct 21
Gold Stocks Bouncing Hard - 19th Oct 21
Stock Market New Intermediate Bottom Forming? - 19th Oct 21
Beware, Gold Bulls — That’s the Beginning of the End - 18th Oct 21
Gold Price Flag Suggests A Big Rally May Start Soon - 18th Oct 21
Inflation Or Deflation – End Result Is Still Depression - 18th Oct 21
A.I. Breakthrough Could Disrupt the $11 Trillion Medical Sector - 18th Oct 21
US Economy and Stock Market Addicted to Deficit Spending - 17th Oct 21
The Gold Price And Inflation - 17th Oct 21
Went Long the Crude Oil? Beware of the Headwinds Ahead… - 17th Oct 21
Watch These Next-gen Cloud Computing Stocks - 17th Oct 21
Overclockers UK Custom Built PC 1 YEAR Use Review Verdict - Does it Still Work? - 16th Oct 21
Altonville Mine Tours Maze at Alton Towers Scarefest 2021 - 16th Oct 21

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Resources Still The Place To Be Invested, But Watch For Correction

Commodities / Metals & Mining Feb 09, 2010 - 11:27 AM GMT

By: The_Gold_Report

Commodities

Best Financial Markets Analysis ArticleAdrian Day, President of Adrian Day Asset Management, says that despite hitting yet new highs near the end of the year, there is much further to go for gold and gold stocks. In this excerpt from a recent article, Adrian reviews the resource markets and looks ahead, particularly to gold; recommending several companies for which he is anticipating good things.


Virtually all markets and asset classes rallied last year, but among the strongest were the resources, continuing to rise on the back of continuing strong demand from China and other emerging economies. Though the broad Dow Jones-UBS Index was up just 19%, individual components were very strong, particularly the base metals, with copper up 139% and others, such as aluminum up, 50%. Oil and gold were also up strongly, while many of the agriculturals lagged, dragging down the index.

Resource stocks dominate our list of “Current Positions,” with an emphasis on gold, silver and energy. Our stocks participated in the rally, for the most part, though many of them, like the index, 41% off its 2007 peak, remain well below their recent highs (Goldcorp, Silver Standard, Vista, and so on). But after the strong rallies, many of them are up 100% or more from where we bought (Devon, Virginia, Silver Wheaton, Allied Nevada, Sprott, and Midland, for example).

Base Metals Due for Correction, While Oil and Gas Stocks not Cheap

We were expecting a correction in the base metals. That correction may yet come; it certainly appears that China’s end-usage is weaker than imports and that inventory is piling up. Further, the current round of tightening there threatens resource demand. We certainly are positive on the long-term outlook and are looking for opportunities to add some top-quality base metals names to our list. For now, all our major companies are either gold and silver or energy, while we have more base metals exposure among juniors and explorers.

We are holding our oil and gas positions, though not adding for now, since most oil and gas stocks are no longer inexpensive. Gas may well be inexpensive, but about 1,500 uncompleted wells (stopped when the price collapsed) could be brought back on quickly and act as an anchor on the recovery. Cold weather is boosting demand right now, but won’t last. Besides, many gas assets already reflect higher prices. We own EOG and are holding, but not adding gas companies right now. Exxon’s purchase of XTO, boosting the major’s reserves to 50% gas, is certainly a sign of confidence in gas, but Exxon has a longer-term perspective than do most investors!

Reasons to Own Gold Unchanged as Banks Become Buyers

It is gold that dominates our list of “Current Positions.” Despite hitting yet new highs near the end of the year, there is much further to go for gold and gold stocks. Gold itself saw its ninth annual advance, to new highs before a 10% correction at the end of the year. Gold certainly was helped by the weak dollar—and the year-end sell-off was provoked by a dollar recovery—but it’s much more than an anti-dollar play. Gold is up in terms of all currencies, boosted by concern about inflation and extraordinarily low interest rates. Mostly, it’s a vote of no confidence in the world’s paper monies, and skepticism of central bankers’ abilities to effect stable money, and specifically to exit stimulus programs in an orderly manner. Nothing has changed, and gold is becoming a new de-facto alternate currency. There is a lot further to go.

Most significant perhaps, central banks have switched from being net sellers to buyers. As we have discussed before, banks that built up their reserves in the last couple of decades tend to have the highest levels of reserves but the lowest proportion of gold (India, China, Korea etc.). The overall level of gold in central bank reserves has dropped from over 30% a decade ago to just over 10%, the lowest level ever. The ease with which India (and Mauritius) scooped up half the IMF’s gold for sale shows clearly that demand overhang is not a problem. Central banks are likely to be net buyers for years to come.

Stocks up Strongly Last Year, but Still Undervalued

Our list emphasizes gold stocks large and small, which, despite the strong rallies last year (100% plus for Goldcorp, Franco Nevada, Vista Gold, Allied Nevada, Almaden and several more) remain for the most part not only well below the 2007-2008 highs, but fundamentally inexpensive. Producers are still selling at historically low prices relative to bullion, and at the lowest price-to-earnings and price-to cash flow ratios in over 20 years. The major producers have problems, however, as we’ve discussed before, most importantly the difficulty in replacing.

Given these difficulties, we favor the juniors and exploration companies; these dominate our list of “Current Positions.” This is where the best value is often found as well as the growth. A couple—Sunridge and Miranda—are even selling below where we bought them, and that’s despite higher gold prices and, particularly in the case of Miranda, advances at the company.

Top Current Buys

So we are comfortable holding and adding to the exploration stocks, on a selective basis, and expect to be adding new recommendations over coming months. Among the stocks on our list, at current price levels, we would look to buy Vista Gold (VGZ, NY, 2.55), Virginia Mines (VGQ, Toronto 5.31), Kiska Metals (KSK, Toronto, 72 cents), and Royal Gold (RGLD, Nasdaq, 44.07). You can buy Royal Gold now; we can get the others a little cheaper if we are patient.

President of Adrian Day Asset Management and a pioneer in global investing, Adrian Day is a London native who was graduated with honors from the London School of Economics. Adrian's thoughts, opinions, insights and analyses have appeared in the pages of Barron's, Forbes, Bloomberg Markets, KitcoCasey.com, The Stock Advisors, Dick Davis Digest, MSN Money, Financial Times, The Daily Reckoning, The Herald Tribune, The New York Times and—of course, The Gold Report—among many others. He also writes the quarterly Portfolio Review newsletter for clients, serves as editor of Adrian Day's Global Analyst and has authored two books on global investing: (International Investment Opportunities: How and Where to Invest Overseas Successfully and Investing Without Borders).

Contact: Adrian Day, 801 Compass Way, Suite 207, Box 6643, Annapolis, MD 21401 Tel: 410-224-2037 Fax: 410-224-8229 Email Adrian Day

Want to read more exclusive Gold Report interviews like this? Sign up for our free e-newsletter, and you'll learn when new articles have been published. To see a list of recent interviews with industry analysts and commentators, visit our Expert Insights page.

DISCLOSURE:
1) Karen Roche, of The Gold Report, conducted this interview. She personally and/or her family own none of the companies mentioned in this interview.
2) The following companies mentioned in the interview are sponsors of The Gold Report: Avalon Rare Metals; Revett Minerals, Goldcorp.
3) Michael Berry—I personally and/or my family own the following companies mentioned in this interview: Senesco Technologies, Goldcorp, Quaterra Resources, and Galway Resources.
I personally and/or my family am paid by the following companies mentioned in this interview: Revett Minerals.

The GOLD Report is Copyright © 2010 by Streetwise Inc. All rights are reserved. Streetwise Inc. hereby grants an unrestricted license to use or disseminate this copyrighted material only in whole (and always including this disclaimer), but never in part. The GOLD Report does not render investment advice and does not endorse or recommend the business, products, services or securities of any company mentioned in this report. From time to time, Streetwise Inc. directors, officers, employees or members of their families, as well as persons interviewed for articles on the site, may have a long or short position in securities mentioned and may make purchases and/or sales of those securities in the open market or otherwise.


© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in