Glittering Gold

Posted on February 26, 2007 , filed under Stocks | Print This Post

I haven’t written much about gold recently although I am heavily invested in a batch of my favorite gold mining stocks. The price of spot gold has been steadily improving over the past few weeks. My belief is that the recent bullish activity is being driven by aggressive fund purchasing. The overall gold market is tiny in comparison to say the trillions managed by global hedge funds. A single large hedge fund has the ability to move the entire gold market. I doubt that normal physical demand can move gold in $10-$20 daily increments. I believe this to be especially true in light of the lack of recent news over the typical concerns of global terrorism or a type of pandemic like a wide spread avian flu. There are valid concerns over inflation that have driven many authors to write that gold is being pushed up as a hedge against inflation. While this may be true the mainstream media hasn’t picked up the correlation between inflation and gold in the same manner that it reported gold’s rise in conjunction with terrorism or a possible pandemic. Recently gold saw a large correction in a day only to recover the following day as shorts were forced to cover their positions. The news trend mixed with the subtly of the recent bull run in gold is leading me to believe that the hot money is currently chasing the metal. If this continues and the individual investor catches wind, that is when we will see a true gold fervor and rush not to miss the boat. My expectation of the next time individuals will hop on the bandwagon is when gold breaks $1,000.

Here are my current favorite picks for gold mining stocks:

Gold Fields Limited (GFI)
Newmont Mining Corporation (NEM)
Tanzanian Royalty Exploration Corporation (TRE)
Northgate Minerals Corporation (NXG)
Yamana Gold, Inc. (AUY)
**Coeur d’Alene Mines Corporation (CDE)

*Disclaimer: The author current owns 500 shares of GFI purchased at an average price of $16.94, 1000 shares of NEM purchased at an average price of $45.32, 5000 shares of TRE purchased at an average price of $5.50, 6000 shares of NXG purchased at an average price of $2.97 and 5000 shares of CDE purchased at an average price of $4.63.

**Coeur d’Alene Mines Corporation is primarily a silver miner with some minor exposure to gold.

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