It’s true; gold has become noticeably less unpopular during the last few months. It is still not as popular an investment as, say, AIG or the shares of almost any other incompetent financial institution. But some investors have actually begun to admit that they’ve purchased some gold.

A couple of the most conspicuous gold-buyers – the Chinese government and hedge fund manager, John Paulson – represent quintessential examples of the “new” gold buyer. This new type of buyer does not also buy ammunition, bottled water and Lynyrd Skynyrd tank tops. Nor does this new gold buyer spend Saturday nights sipping Gallo Hearty Burgundy in his La-Z-Boy, while flipping through binders full of Walking Liberty gold coins.

These new gold buyers do not LOVE gold nearly as much as they FEAR paper. But they are buying aggressively nonetheless…and leaving their tracks everywhere.

Earlier this year, for example, Paulson & Co., the hedge-fund firm run by billionaire John Paulson, became the largest holder of the SPDR Gold Trust (NYSE: GLD), an ETF that buys gold bullion. The New York-based firm owned 8.7 percent of the fund, as of March 31. Paulson has also taken very large stakes in several gold mining companies – in particular Gold Fields Ltd. (NYSE:GFI), Kinross Gold Corp. (NYSE:KGC) and AngloGold Ashanti Ltd. (NYSE:AU)

Paulson has lots of company among mom and pop investors who are allocating some of their capital to gold. As the nearby chart illustrates quite clearly, the SPDR Gold Trust ETF has been accumulating ever-rising quantities of gold bullion – all in response to investor demand.

Although this chart is a bit dated, the trend it illustrates remains firmly entrenched. As of September 21, this ETF controlled 1,563 tonnes of gold, making it the world’s fifth individual holder of gold. The Swiss central bank, by comparison, holds only a little more than 1,000 tonnes of gold.

Meanwhile, the Chinese doubled their official gold holdings last year, and have been making a lot of headlines with some very public gripes about the dollar. A couple weeks ago, Cheng Siwei, former vice chairman of the Standing Committee of the Chinese Communist Party, complained, “If [the Fed] keeps printing money to buy bonds, it will lead to inflation, and after a year or two, the dollar will fall hard. Most of our [Chinese] foreign reserves are in U.S. bonds and this is very difficult to change, so we will diversify incremental reserves into euros, yen and other currencies…Gold is definitely an alternative.”

No wonder rumors were running rampant last week that the 403 tonnes of gold the IMF is selling will land in a Chinese vault.

Interestingly, while investment demand for gold inexorably rises, mined production of gold inexorably declines. Apparently, the folks who coax this precious metal from the earth can’t coax as much of it as they might like.

According to Grant’s Interest Rate Observer (citing statistics from the World Gold Council), worldwide gold production has dipped over the last seven years. Gold production since 2002 has declined from 2,590 metric tons to 2,486 metric tons through June 30.

These divergent trends – demand up and supply down – do not guarantee a rising gold price, but they do suggest that a rising gold price may become the path of least resistance.

Obviously, substantial above-ground supplies of gold – in bank vaults, around fingers, in belly buttons, etc. – will find its way into the gold market if/as/when prices rise. Nevertheless, a powerful inflationary trend would produce enough investment demand for gold to easily absorb all sources of supply…and ALSO push the gold price higher.

“There is a growing distrust of paper currencies amid a deluge of massive government deficits since late 2008,” Roseman concludes. “The dollar might be the biggest drunk at the bar, but the euro and other currencies are also drinking their way to devaluation against gold.”

Source: The New Gold Buyer

It’s true; gold has become noticeably less unpopular during the last few months. It is still not as popular an investment as, say, AIG or the shares of almost any other incompetent financial institution. But some investors have actually begun to admit that they’ve purchased some gold.

A couple of the most conspicuous gold-buyers – the Chinese government and hedge fund manager, John Paulson – represent quintessential examples of the “new” gold buyer. This new type of buyer does not also buy ammunition, bottled water and Lynyrd Skynyrd tank tops. Nor does this new gold buyer spend Saturday nights sipping Gallo Hearty Burgundy in his La-Z-Boy, while flipping through binders full of Walking Liberty gold coins.

These new gold buyers do not LOVE gold nearly as much as they FEAR paper. But they are buying aggressively nonetheless…and leaving their tracks everywhere.

Earlier this year, for example, Paulson & Co., the hedge-fund firm run by billionaire John Paulson, became the largest holder of the SPDR Gold Trust (NYSE: GLD), an ETF that buys gold bullion. The New York-based firm owned 8.7 percent of the fund, as of March 31. Paulson has also taken very large stakes in several gold mining companies – in particular Gold Fields Ltd. (NYSE:GFI), Kinross Gold Corp. (NYSE:KGC) and AngloGold Ashanti Ltd. (NYSE:AU)

Paulson has lots of company among mom and pop investors who are allocating some of their capital to gold. As the nearby chart illustrates quite clearly, the SPDR Gold Trust ETF has been accumulating ever-rising quantities of gold bullion – all in response to investor demand.

Although this chart is a bit dated, the trend it illustrates remains firmly entrenched. As of September 21, this ETF controlled 1,563 tonnes of gold, making it the world’s fifth individual holder of gold. The Swiss central bank, by comparison, holds only a little more than 1,000 tonnes of gold.

Meanwhile, the Chinese doubled their official gold holdings last year, and have been making a lot of headlines with some very public gripes about the dollar. A couple weeks ago, Cheng Siwei, former vice chairman of the Standing Committee of the Chinese Communist Party, complained, “If [the Fed] keeps printing money to buy bonds, it will lead to inflation, and after a year or two, the dollar will fall hard. Most of our [Chinese] foreign reserves are in U.S. bonds and this is very difficult to change, so we will diversify incremental reserves into euros, yen and other currencies…Gold is definitely an alternative.”

No wonder rumors were running rampant last week that the 403 tonnes of gold the IMF is selling will land in a Chinese vault.

Interestingly, while investment demand for gold inexorably rises, mined production of gold inexorably declines. Apparently, the folks who coax this precious metal from the earth can’t coax as much of it as they might like.

According to Grant’s Interest Rate Observer (citing statistics from the World Gold Council), worldwide gold production has dipped over the last seven years. Gold production since 2002 has declined from 2,590 metric tons to 2,486 metric tons through June 30.

These divergent trends – demand up and supply down – do not guarantee a rising gold price, but they do suggest that a rising gold price may become the path of least resistance.

Obviously, substantial above-ground supplies of gold – in bank vaults, around fingers, in belly buttons, etc. – will find its way into the gold market if/as/when prices rise. Nevertheless, a powerful inflationary trend would produce enough investment demand for gold to easily absorb all sources of supply…and ALSO push the gold price higher.

“There is a growing distrust of paper currencies amid a deluge of massive government deficits since late 2008,” Roseman concludes. “The dollar might be the biggest drunk at the bar, but the euro and other currencies are also drinking their way to devaluation against gold.”

Source: The New Gold Buyer

It was a busy day at South African-based Gold Fields (NYSE:GFI). First off, Africa’s second- largest miner agreed to sell its 19.9 percent stake in Sino Gold Mining to Eldorado Gold in an all stock deal valued at $282 million.

Eldorado will exchange 48 of its shares for every 100 shares of Sino Gold. That will give Gold Fields 27.8 million shares or a 7 per cent stake in Eldorado. Eldorado closed at C$10.41 for a C$0.57 loss.

Next up, Gold Fields inked a deal to earn up to 70 per cent of the Woodjam North gold-copper property in British Columbia from Cariboo Rose Resources, which holds 40 per cent and Fjordland Exploration, which holds 60 per cent. Under the proposal, Gold Fields can take an initial 51 per cent interest by spending C$7 million and making $350,000 in cash payments over a three year period. Gold Fields can earn another 19 per cent by spending an additional C$12 million over a four year term. Cariboo ended the day up C$0.04 at C$0.135, while Fjordland added C$0.03 to close at C$0.11.

East Asia Minerals added C$0.06 to close at C$0.70 after reporting rock chip samples of up to 125.9 grams gold per tonne over 23 metres at the Miwah project in Indonesia.

Greystar Resources tagged significant, near-surface gold mineralization three kilometres south of its wholly owned, multimillion-ounce Angostura gold-silver deposit in northeastern Colombia. Highlights included 36.7 metres grading 1.1 gram gold per tonne. Greystar ended the day up C$0.09 at C$3.74.

Is it the usual one step back for every two steps forward or was Wednesday sell-off the start of a widely anticipated correction to the nearly three month rally? We shall see what Thursday trading has in store.

Source: Resource Stock Roundup:Thursday, June 04th, 2009

“FEAR, Mr. Bond, takes gold out of circulation and hoards it against the evil day,” as 007 learns from a Bank of England officer in Ian Fleming’s Goldfinger (1959).

So “in a period of history when every tomorrow may be the evil day, it is fair to say that a fat proportion of the gold dug out of one corner of the earth is at once buried again in another corner.”

Evil-day gold buying really motored since the credit collapse began in August 2007. Soaking up investment dollars worldwide, in fact, new allocations to the metal – whether trust fund or owned outright – swelled by 38% during the first quarter of 2009 compared with total demand between Jan. and March 2008, according to marketing-group the World Gold Council (WGC).

Within that figure, what the GFMS consultancy (who supply the WGC with its data) calls “identifiable investment” leapt 248% compared to Q1 ‘08. And gold ETFs made the headlines once more, sucking in “another quarterly record” as new inflows required 465 tonnes of metal to back them, thus dwarfing the previous record of 149 tonnes set in the third quarter of last year.

That doesn’t mean the world’s investors are now all in, however. According to the World Gold Council’s Marcus Grubb last month (using we-don’t-know-which data), current gold investment allocation stands at less than 0.6% of total global wealth.

It makes a nice pie chart, and it offers a useful snapshot of different asset classes vs. each other. But we also think the idea’s worth refining. Because this estimate both over-states liquid assets in toto and under-estimates the stock of gold available to investment flows – whether retail or wholesale.

First, note the scope for double-counting between pension, mutual and insurance funds. I’m not saying the WGC’s data trips up on that error, but you can see how likely it seems given the end-allocation categories applied. For instance, “hedge funds” are stripped out separately (as are REITs and private-equity), even though institutional allocations via funds-of-funds will be counted elsewhere under the broader “funds” title.

Similarly, but more pertinent, the outstanding quantity of “gold – investment stocks” underplays the true volume of metal held as a store of wealth. Simply counting the “investment” volume excludes fully 84% of the above-ground supply, as another chart from the WGC’s presentation shows.

Why not also include “official sector” gold hoards? Sovereign wealth funds and FX reserves were included on the other side of the ledger, after all.

More crucially still, why not include jewelry? Trying to split out the volume of trinkets held for aesthetics alone might feel easy enough to a Western analyst just back from window-shopping at Mappin & Webb. But across south-east Asia, and most particularly in India – typically the world’s No.1 destination for physical gold each year – large, chunky necklaces and bracelets make for “investment jewelry”, acting as a store of wealth in the absence of any formal banking network.

Still, the point is well made, we believe. Gold remains but a slither of investable wealth – albeit a fast-growing slither as the value of other assets has dropped.

“Gold [has] been deprecated and reduced as a financial asset,” as Jeffrey Christian of the CPM consultancy put it earlier this year. “In 1968 gold may have represented 4.5% to 5.0% of the world’s wealth…By the 1990s it was down to 0.2% of the world’s wealth. Not that gold was falling in value so much as the other wealth – stocks, bonds, paper assets, government bonds, corporate bonds, bank deposits – were exploding once the tie to gold was severed.

“In 2006 gold represented 0.2% of world wealth. At the end of 2007, it was about 0.4%. Depending on what you think about wealth destruction in 2008, it may have been 0.6%.”

That figure just about matches the WGC’s estimate of 0.7% (perhaps they used the same inputs and excluded the same volumes of central-bank and jewelry gold?). It also contrasts with our own Estimate of Gold as a Proportion of Investable Wealth at nearer 2.7% by the close of 2008.

Either way, gold is fast-attracting attention – both from nay-sayers, retail investors and new die-hard bulls amongst the professional institutions. Regulatory filings show legendary hedge-fund manager John Paulson took his position in the SPDR Gold ETF (NYSE:GLD) to 30% of his portfolio during the first quarter of 2009. Paulson & Co. now owns 8.7% of that paper – as well as significant chunks of the Gold Miners ETF (NYSE:GDX), Kinross Gold (NYSE:KGC), Gold Fields (NYSE:GFI) and AngloGold Ashanti (NYSE:AU) – if not any actual bullion itself.

Does that in itself make gold a buy? Of course not. But compared to the evil days of 1930s depression – or the fearful inflationary panic of the late 1970s – the world’s wealth remains very under-invested in metal right now.

Regards,
Adrian Ash

Source: The World Gold Council Wrong About Gold

Mindoro Resources inked a deal allowing Gold Fields (NYSE:GFI) the right to earn up to a 75 per cent stake in Mindoro’s El Paso, Lobo and Talahib porphyry copper-gold projects in the Philippines. Gold Fields must fund all the exploration and produce a feasibility study for each project to earn the interest. Mindoro ended the day up C$0.01 at C$0.15.

Tenajon Resources tabled an updated resource for its Moly Brook zone in Newfoundland. At a cut-off of 0.04% molybdenum, the indicated resource tallies 86.8 million tonnes grading 0.065% molybdenum and the inferred resource came in at 31.3 million tonnes grading 0.056% molybdenum. Tenajon ended the day down C$0.02 at C$0.10.

HudBay Minerals lost $3.95 million in the first quarter, compared with a profit of $21.52 million in the same period of 2008. The lower earnings reflect significantly lower realized prices for copper and zinc in 2009. On the exploration front, HudBay cut 23.11 grams gold per tonne over 8.75 metres at its Lalor deposit in Manitoba. HudBay ended the day down C$0.18 at C$8.65.

The Canadian markets are showing exceptional resilience in the face of still-weak economic data. We shall see what Wednesday trading has in store.

Source: Resource Stock Roundup: Wednesday, May 06th, 2009

But that doesn’t mean contrarian investors can’t make a profit. History is littered with examples of investors that made a fortune during the darkest days for the economy.

William has a four-point plan to beat the bear this time round: 1) Load up on high dividend stocks; 2) Buy gold; 3) Stick to ‘global titan’ companies; and 4) Stay relaxed…

This report from Money Morning:

No. 1 – Stock up on Dividend stocks

Many investors are so scared by the wild gyrations the stock market has seen of late that they’ve jettisoned everything in their search for safety.

Not only is this a massive mistake from a timing standpoint, it’s also a major misstep because of all the dividend income those folks are going to forego.

Dividend-paying stocks tend to be more stable than their non-dividend paying brethren -particularly during rocky stock markets. In other words, stocks that have income streams attached are treated better, especially when the going gets tough.

They also outperform non-dividend paying stocks by even more in down markets than they do in up markets.
By consistently reinvesting dividends during down markets, investors can substantially expand their asset base, which puts them way ahead of the game when markets recover and stock prices soar – as they always eventually do.

And the savvy investors who owned them watched as their own portfolios easily outperformed the market averages and roundly trounced the returns of portfolios that were devoid of or light on dividend-paying shares.

And there are some excellent investment candidates. Two of the best are the PowerShares International Dividend Achievers Fund (AMEX:PID) and the Alpine Dynamic Dividend Fund (MUTF:ADVDX), two exchange-traded funds (ETFs) that we like a great deal.

The PowerShares International Fund is a global-income portfolio that can help you spread your risk, while also earning income. The Alpine fund is a more-specialized fund that uses a “dividend harvest strategy” that can boost the fund’s yield.

Both funds invest in companies that have survived countless business cycles, and that are likely to survive this downdraft, too.

Because dividend-paying stocks tend to be downdraft resistant, portfolios with higher yields tend to last longer and pay stronger. That’s something that’s important to all of us, but especially to investors who are nearing retirement, or who have already retired.

No. 2 – Go for Gold

When times are tough, gold soars.

And frankly, the economy has been tough: $4 gasoline, the housing crisis, rampant inflation, plummeting stocks…

But all the while, gold prices vaulted a cool 26.5% in the past year.

Missing out on gold is already costing investors a pretty penny. What’s more, most experts are forecasting gold prices to rise at least another 75.6% by the end of this year.

So, how does one profit from gold? It’s simple. You don’t have to wade through a plethora of flashy websites offering bullion or risk it all on a junior mining company.

Instead, here are five ways to profit from gold right away – from the most lucrative to the least risky.

Gold Fields Ltd. (NYSE:GFI): South Africa’s Gold Fields Ltd. is the world’s fourth-biggest gold producer – with about 90 million ounces in reserve from its operations in Africa, South America and Australia.

It recently reported that its fourth-quarter production would beat its previous forecast by up to 120%.

Overall, the company has a solid balance sheet and ample reserves. But if anything scares investors away, it’s Gold Fields’ location.

South Africa mines are frequently a political tool between the country’s labor unions and state-owned utility provider Eskom Holdings Ltd. (OTC: ESKAY), which controls 95% of the country’s power.

Eskom recently jacked electricity prices up 27.5%, and unions decided to hit the government where it hurts – by striking- thus gutting the government of taxes from its vast gold profits.

That is just one example of why this stock is a risky gold play. Gold could reach another record but Gold Fields may not see a penny of it if its miners are on strike.

Yamana Gold Inc. (NYSE:AUY): When gold prices are high, investors should pay extra attention to mining companies with increasing production levels because they translate into a bigger bottom line.

For its second quarter this year, Yamana Gold Inc. produced almost 10% more gold than it did in the previous quarter.

What’s more, its gold production is expected to double to 2.2 million ounces per year by 2012, primarily from its Brazil and Argentina mines.

That’s because Yamana Gold went on a spending spree in the past two years, buying up junior mines around the world to lock in reserves.

“Now it is about production, cash flow and earnings,” Chief Executive Officer Peter Marrone told Reuters.

It’s also about dividends. The company recently kicked up its investor payout by 300%, a strong vote of confidence to its production and stock performance.

Barrick Gold Corp. (NYSE:ABX): Like Yamana, Barrick Gold Corp. has also been on a spending spree. Over the past year, it has gobbled up stakes in a half-dozen mines, multiplying its reserves and production capacities in light of record gold prices.

All totaled, Barrick owns 27 mines in five continents and produces over 8 million ounces of gold a year, making it the world’s largest gold miner.

We consider this a medium-risk investment because – despite its solid operations, profitability and efficiency – it’s vulnerable like any tradable stock.

But since it’s the world largest gold producer, its stock will move closest in line with gold compared to other gold miners.

And as an added bonus, it just kicked up its biannual dividend by 33%.

SPDR Gold Trust (NYSE:GLD): Some investors want to buy gold but feel uneasy about storing it overseas, by another person… and for a commission nonetheless. But at the same token, not many
want to make their homes a burglary target by stashing gold reserves in their basements.

Enter SPDR Gold Trust (GLD), an ETF that trades like a stock, but whose value directly tracks the price of gold bullion. Only 1.82 percentage points separate the gains made by gold price and Gold Trust in the past year.

Gold Trust has a $17 billion-plus market cap, giving it ample liquidity. Simply put, it’s the easiest way to buy gold without buying physical bullion or coins.

EverBank Select Metals Account has a minimum deposit that is 98% lower than its competitors, and its commission costs are up to 86% lower than other metals brokers and bullion banks.

Second, it offers two types of gold accounts:
Unallocated: Your purchased gold is pooled with that of other investors, eliminating storage and maintenance costs. The minimum deposit amount for unallocated accounts is a scant $5,000.
Allocated: You directly own the gold you purchase, held in your own private account. The minimum deposit for allocated accounts is $7,500.

Both types of accounts can be set up 24/7 online. But if you prefer the phone, call 866-326-6241, and be sure to give them the code 12608 when setting up an account.

We should point out that the publisher of Money Morning has a marketing relationship with EverBank, but that’s because its products are best in show.

No. 3 – Grab the “Global Titans”

There are a handful of companies that are either located in, or focused on, overseas markets that remain poised for growth – even if the U.S. market slows down. We call those companies “Global Titans” because they usually derive a hefty portion of their sales and profits from outside U.S. borders.

The old adage that “when the U.S. economy sneezes, the rest of the world catches a cold” is becoming increasingly less valid, due to an economic process known as “decoupling.” This means that – eventually – such economies as China and others will be able to show respectable growth, even if the U.S. economy slows down or even drops into a recession.

In the immediate term, even the partial decoupling we’ve seen means that these other economies could continue to grow, even if we get mired down by the housing meltdown, subprime crisis and ensuing credit woes.

While those markets may take a near-term hit because of the maladies of the U.S. economy, their longer-term growth is much less dependent than ever before on the U.S.-centric model of the global markets.

And Money Morning has identified a portfolio of Global Titans whose quarterly earnings and stock prices are laughing in the face of the gloomy U.S. market: The Coca-Cola Co. (NYSE:KO), PepsiCo Inc. (NYSE:PEP), Diageo PLC (NYSE:DEO), Yum! Brands Inc. (NYSE:YUM), McDonald’s Corp. (NYSE:MCD) and The Boeing Co. (NYSE:BA).

No. 4 – Relax, Breathe

No one knows how long this economic vortex will last, but two things are dead certain:

• We’ve been here before.
• No matter how bad it gets, it will pass.

So far, we’ve gone through the Price/Earnings (P/E) Ratio peak crash of 1901; the Great Crash of 1929, the “Black Monday” stock market crash of October 1987, the Asian Contagion of 1997, loan defaults in South America and Russia, and even then 9/11 terrorist attacks.

And not only did we survive each; our economy rebounded to become bigger, stronger and leaner.

Source: US Economy: Are We Nearing the End of the American Dream?

Meanwhile, the wider US economy is sliding into a recession.

William Patalon III says there are four solid ways to protect your portfolio from these forces: 1) Buy dividend-paying stocks; 2) Buy gold; 3) Buy companies focused on overseas market; and 4) Don’t panic…

The following extract is taken from a research report published over the weekend by Money Morning…

No. 1 – Stock Up on Dividend stocks

Many investors are so scared by the wild gyrations the stock market has seen of late that they’ve jettisoned everything in their search for safety.

Not only is this a massive mistake from a timing standpoint, it’s also a major misstep because of all the dividend income those folks are going to forego.

Dividend-paying stocks tend to be more stable than their non-dividend paying brethren -particularly during rocky stock markets. In other words, stocks that have income streams attached are treated better, especially when the going gets tough.

They also outperform non-dividend paying stocks by even more in down markets than they do in up markets.
By consistently reinvesting dividends during down markets, investors can substantially expand their asset base, which puts them way ahead of the game when markets recover and stock prices soar – as they always eventually do.

And the savvy investors who owned them watched as their own portfolios easily outperformed the market averages and roundly trounced the returns of portfolios that were devoid of or light on dividend-paying shares.

And there are some excellent investment candidates. Two of the best are the PowerShares International Dividend Achievers Fund (PID) and the Alpine Dynamic Dividend Fund (ADVDX), two exchange-traded funds (ETFs) that we like a great deal.

The PowerShares International Fund is a global-income portfolio that can help you spread your risk, while also earning income. The Alpine fund is a more-specialized fund that uses a “dividend harvest strategy” that can boost the fund’s yield.

Both funds invest in companies that have survived countless business cycles, and that are likely to survive this downdraft, too.

Because dividend-paying stocks tend to be downdraft resistant, portfolios with higher yields tend to last longer and pay stronger. That’s something that’s important to all of us, but especially to investors who are nearing retirement, or who have already retired.

No. 2 – Go for Gold

When times are tough, gold soars.

And frankly, the economy has been tough: $4 gasoline, the housing crisis, rampant inflation, plummeting stocks…

But all the while, gold prices vaulted a cool 26.5% in the past year.

Missing out on gold is already costing investors a pretty penny. What’s more, most experts are forecasting gold prices to rise at least another 75.6% by the end of this year.

So, how does one profit from gold? It’s simple. You don’t have to wade through a plethora of flashy websites offering bullion or risk it all on a junior mining company.

Instead, here are five ways to profit from gold right away – from the most lucrative to the least risky.

Gold Fields Ltd. (GFI): South Africa’s Gold Fields Ltd. is the world’s fourth-biggest gold producer – with about 90 million ounces in reserve from its operations in Africa, South America and Australia.

It recently reported that its fourth-quarter production would beat its previous forecast by up to 120%.

Overall, the company has a solid balance sheet and ample reserves. But if anything scares investors away, it’s Gold Fields’ location.

South Africa mines are frequently a political tool between the country’s labor unions and state-owned utility provider Eskom Holdings Ltd. (OTC:ESKAY), which controls 95% of the country’s power.

Eskom recently jacked electricity prices up 27.5%, and unions decided to hit the government where it hurts – by striking- thus gutting the government of taxes from its vast gold profits.

That is just one example of why this stock is a risky gold play. Gold could reach another record but Gold Fields may not see a penny of it if its miners are on strike.

Yamana Gold Inc. (AUY): When gold prices are high, investors should pay extra attention to mining companies with increasing production levels because they translate into a bigger bottom line.

For its second quarter this year, Yamana Gold Inc. produced almost 10% more gold than it did in the previous quarter.

What’s more, its gold production is expected to double to 2.2 million ounces per year by 2012, primarily from its Brazil and Argentina mines.

That’s because Yamana Gold went on a spending spree in the past two years, buying up junior mines around the world to lock in reserves.

“Now it is about production, cash flow and earnings,” Chief Executive Officer Peter Marrone told Reuters.

It’s also about dividends. The company recently kicked up its investor payout by 300%, a strong vote of confidence to its production and stock performance.

]]> http://www.contrarianprofits.com/articles/us-economy-are-we-nearing-the-end-of-the-american-dream/5410/feed 0 http://www.contrarianprofits.com/articles/commodities-bear-market-or-bounce/4955 http://www.contrarianprofits.com/articles/commodities-bear-market-or-bounce/4955#comments Wed, 27 Aug 2008 15:34:41 +0000 Martin Hutchinson http://www.contrarianprofits.com/articles/commodities-bear-market-or-bounce/4955 Martin Hutchinson in Money Morning says that over the long-term oil and agricultural commodities are likely to deflate.

This is because, once the threat posed by the US housing crisis has passed, the Federal Reserve will be forced to increase interest rates to fight inflation. Other countries will follow, which will deflate the commodities boom.

However, over the short-term, gold, whose movements are directly linked to inflation, is likely to bounce. Martin reckons a price tag of $1,500 an ounce for the yellow metal is entirely possible. He recommends two ETFs and four gold miners to profit from this situation…

The most important factor regulating international demand is the overall level of interest rates in terms of inflation. If “real” interest rates – netting out…

]]> Martin Hutchinson in Money Morning says that over the long-term oil and agricultural commodities are likely to deflate.

This is because, once the threat posed by the US housing crisis has passed, the Federal Reserve will be forced to increase interest rates to fight inflation. Other countries will follow, which will deflate the commodities boom.

However, over the short-term, gold, whose movements are directly linked to inflation, is likely to bounce. Martin reckons a price tag of $1,500 an ounce for the yellow metal is entirely possible. He recommends two ETFs and four gold miners to profit from this situation…

The most important factor regulating international demand is the overall level of interest rates in terms of inflation. If “real” interest rates – netting out the rate of inflation – are high as in the 1980s, demand growth is sluggish (because the cost of capital to make new investments is high) and so commodity prices are generally low. Conversely, low real interest rates and surging inflation, such as occurred in 1973, can cause the prices of all commodities to spike upwards.

While there are signs of global demand slowing, it is nowhere near stalling. The International Monetary Fund (IMF) expects world gross domestic product (GDP) growth of 4.1% in 2008 and 3.9% in 2009. Those rates compare with growth rates of 5% or just over in 2006 and 2007. However, they are still sufficient to put considerable pressure on commodity supplies, which are already stretched by current demand.

To reduce commodity demand, and produce a real drop in prices, global interest rates would have to rise sharply. Currently, short-term interest rates are negative in real terms (below the local rate of inflation) in the United States, the European Union and Japan, and only just positive in the United Kingdom.

They are also sharply negative in India and many emerging markets and likely to become so in China, where official inflation has been suppressed pre-Olympics. With negative real interest rates prevailing almost everywhere, the global trend must be one of firm demand and accelerating inflation.

Eventually, the United States, which tends to lead the international community in interest rate matters, will be forced by accelerating inflation to increase sharply its short term interest rates – the 2% Federal Funds rate is now more than 3% below consumer price inflation (CPI) and more than 5% below producer price inflation (PPI). When that happens, other countries will follow and the commodities boom will deflate.

However, it won’t happen just yet because of the housing crisis. U.S. Federal Reserve Chairman Ben S. Bernanke wants to see home prices come to some kind of equilibrium before raising interest rates, otherwise he could produce an uncontrollable fall in house prices, causing more or less the whole U.S. home-mortgage market to default.

Since interest rates are likely to remain low for several months at least, commodity prices are likely to “bounce,” rather than remaining in a bear market. Speculative capital, of which there is still plenty, will then rush back into commodities, pushing prices up still further.

Of the various commodities, agricultural commodities are the least likely to bounce substantially, because the supply cycle is relatively short and high prices are already causing new planting. Shipping rates are also fairly unlikely to soar, as new building has been undertaken at a frantic pace in the past few years and capacity is now coming on stream.

On the other hand, metals and energy, for which finding new sources is a lengthier process, are more likely to bounce, particularly if geopolitical uncertainty continues to increase in the aftermath of the Georgia invasion.

The most upwardly mobile commodities are likely to be those whose movements are directly related to inflation – gold and silver. Gold, in particular, is one of very few commodities whose price is currently within a few percent of that last September, when Bernanke & Co. began cutting interest rates.

While the equivalent in real terms of 1980’s $850 peak in the gold price may be unattainable – that would require gold to reach $2,300 – a $1,500 price for gold certainly seems possible.

The SPDR Gold Trust ETF (NYSE:GLD) is about the most efficient way of getting a pure gold play.

As an alternative, you might consider a silver investment – the metal is currently at less than 15% of its 1980 high equivalent to $130 per ounce – the iShares Silver Trust ETF (AMEX:SLV) seems the best way to play silver directly.

You may do even better in gold mining shares. The recent declines in the gold price have caused a huge amount of air to whoosh out of gold share prices, to the extent that they now represent pretty good value.

• Barrick Gold Corp. (NYSE:ABX) is a Canadian company, with mostly North American production, plus some in South America and Africa, and copper and zinc add-ons. With a market capitalization of $29 billion, this firm has plenty of liquidity. It has a trailing Price/Earnings (P/E) ratio (on last 12 months earnings) of 15, and a forward P/E (on next 12 months) of 13. The stock is reasonably valued and has little political risk.

• Newmont Mining Corp. (NYSE:NEM) is a U.S. company, operating in the United States, Australia, Peru, Indonesia, Ghana, Canada, Bolivia, New Zealand and Mexico. It also has low political risk, but with a $19 billion market capitalization, trailing P/E of 25 andforward P/E of 14, Barrick still looks like a better value.

• Yamana Gold Inc. (NYSE:AUY) is a Canadian company with mining in Brazil, Argentina, Chile, Honduras and Nicaragua.  It has a market capitalization of $7 billion and a trailing P/E of 33, but a forward P/E of only 10. There’s medium political risk, but the firm expects to double production to 2.2 million ounces per year by 2012, primarily in Brazil and Argentina.
• Gold Fields Ltd. (NYSE:GFI) is a South African company with mining operations in South Africa, Ghana, Australia and Venezuela (of which they recently sold control to a local company). With a market capitalization of $5.7 billion, trailing P/E of 11 and forward P/E of 10, this firm is an upper-medium political risk, depending on what you think of South Africa. However, its shares have fallen a lot and are now cheap.

Source: Commodities: Bear Market or Bounce?

]]> http://www.contrarianprofits.com/articles/commodities-bear-market-or-bounce/4955/feed 1 http://www.contrarianprofits.com/articles/money-mornings-5-best-gold-investment-plays/4167 http://www.contrarianprofits.com/articles/money-mornings-5-best-gold-investment-plays/4167#comments Wed, 30 Jul 2008 14:11:03 +0000 Contrarian Profits http://www.contrarianprofits.com/articles/money-mornings-5-best-gold-investment-plays/4167 MoneyMorning.com is one of our favorite contrarian investing websites here at Contrarian Profits. That’s because it puts out tons of great investing insights every day.

And today is no exception. Money Morning has just published a great special report: The Five Best Ways to Invest in Gold Today.

Frankly, this is one of the best gold investing guides we’ve come across. It’s well worth reading. And considering gold prices have already jumped 43.25% in the past year, it could prove extremely lucrative…

Gold Play #1: Triple-Digit Production Gains

Many gold investors are innately averse to risk, which is why some don’t consider buying stocks in mining companies as “buying gold,” per se.

But unlike many other publicly traded companies, mining shares can rise sharply when the value…

]]> MoneyMorning.com is one of our favorite contrarian investing websites here at Contrarian Profits. That’s because it puts out tons of great investing insights every day.

And today is no exception. Money Morning has just published a great special report: The Five Best Ways to Invest in Gold Today.

Frankly, this is one of the best gold investing guides we’ve come across. It’s well worth reading. And considering gold prices have already jumped 43.25% in the past year, it could prove extremely lucrative…

Gold Play #1: Triple-Digit Production Gains

Many gold investors are innately averse to risk, which is why some don’t consider buying stocks in mining companies as “buying gold,” per se.

But unlike many other publicly traded companies, mining shares can rise sharply when the value of what they’re extracting is spiking.

In this case, gold miners today are getting 182% more for the yellow metal compared to spot prices five years ago.

And – barring the increased cost of oil – mining the gold costs relatively the same, further widening a mining company’s profitability.

South Africa’s Gold Fields Ltd. (ADR: GFI) is the world’s fourth-biggest gold producer – with about 90 million ounces in reserve from its operations in Africa, South America and Australia.

It recently reported that its fourth-quarter production would beat its previous forecast by up to 120%.

Overall, the company has a solid balance sheet and ample reserves. But if anything scares investors away, it’s Gold Fields’ location.

South Africa mines are frequently a political tool between the country’s labor unions and state-owned utility provider Eskom Holdings Ltd. (OTC: ESKAY), which controls 95% of the country’s power.

Eskom recently jacked electricity prices up 27.5%, and unions decided to hit the government where it hurts – by striking- thus gutting the government of taxes from its vast gold profits.

That is just one example of why this stock is a risky gold play. Gold could reach another record but Gold Fields may not see a penny of it if its miners are on strike.

Gold Play #2: All About “Cash Flow and Earnings”

When gold prices are high, investors should pay extra attention to mining companies with increasing production levels because they translate into a bigger bottom line.

For its second quarter this year, Yamana Gold Inc. (AUY) produced almost 10% more gold than it did in the previous quarter.

What’s more, its gold production is expected to double to 2.2 million ounces per year by 2012, primarily from its Brazil and Argentina mines.

That’s because Yamana Gold went on a spending spree in the past two years, buying up junior mines around the world to lock in reserves.

“Now it is about production, cash flow and earnings,” Chief Executive Officer Peter Marrone told Reuters in May.

It’s also about dividends. The company recently kicked up its investor payout by 300%, a strong vote of confidence to its production and stock performance.

Unlike Gold Fields, Toronto-based Yamana Gold has operations in relatively stable parts of the world – making it less risky on the geopolitical front.

But despite its name, Yamana Gold isn’t purely a gold miner. It also produces copper, silver, and zinc. How well the company continues to mine those metals – as well as their fluctuating prices – will also affect Yamana’s stock value regardless of gold prices.

Gold Play #3: Multiplying Profits with “Free Oil”

Imagine how much money you’d save if you owned your own gas station. Just fill up. Go anywhere. Forget worrying about dishing out $100 a tank.

Now, multiply the size of your oil consumption by 3,600 barrels.

Then multiply that by 365 for each day of the year.

That’s how much “free oil” Toronto-based Barrick Gold Corp. (ABX) is going to have now that its $410 million takeover offer was accepted by Cadence Energy (PINK: CDSFF), an oil and gas producer.

And that oil is sorely needed.

You see, gold prices have no doubt added billions to the bottom lines of mining companies. But 25% of the cost to mine that gold goes to oil.

Factor in gold’s projected 58% climb, and this company will have a huge profitability advantage over its mining peers and the average S&P 500 Index stock.

Like Yamana, Barrick has also been on a spending spree. Over the past year, it has gobbled up stakes in a half-dozen mines, multiplying its reserves and production capacities in light of record gold prices.

All totaled, Barrick owns 27 mines in five continents and produces over 8 million ounces of gold a year, making it the world’s largest gold miner.

We consider this a medium-risk investment because – despite its solid operations, profitability and efficiency – it’s vulnerable like any tradable stock.

But since it’s the world largest gold producer, its stock will move closest in line with gold compared to other gold miners.

And as an added bonus, it just kicked up its biannual dividend by 33%.

Gold Play #4: Tracking Gold Dollar for Dollar

Some investors want to buy gold but feel uneasy about storing it overseas, by another person… and for a commission nonetheless.

But on the same token, not many want to make their homes a burglary target by stashing gold reserves in their basements.

Enter SPDR Gold Trust (GLD), an exchange-traded fund (ETF) that trades like a stock, but whose value directly tracks the price of gold bullion.

Only 1.82 percentage points separate the gains made by gold price and Gold Trust in the past year.

Gold Trust has a $17 billion-plus market cap, giving it ample liquidity.

And with the ongoing skid in the U.S. dollar, investors have been fleeing the greenback and investing in gold. As it gains investors, the Gold Trust has continued to add to its gold holdings.

At the same time, central banks have been selling their gold reserves. That’s important to mention because it elevates Gold Trust’s status on the list of global gold holders.

Right now, it has the eighth-largest gold holding in the world – meaning that it has more gold than 97% of all the countries in the world. What does this mean?

Simply put, it’s the simplest way to buy gold without buying physical bullion or coins.

Gold Play #5: The Safest Gold Play Out There

Investors often shy away from bullion account providers because of their steep premiums and minimums. And reasonably so…

In addition to charging a 3% commission, Perth Mint also has a $250,000 minimum investment requirement – not exactly an amount many first-time gold investors have in between their couch cushions.

Kitco charges a 6% premium for 1 oz. Gold Eagle coins. Shipping and handling costs are also added, but varies on the size of the order.

Monex is perhaps the worst. On top of the 3% to 5% difference between what it buys and sells, there are commission rates ranging from 0.5% to 2.0%. Then there are shipping costs of $15 per transaction plus $1 per ounce. Then there are handling charges of $75 per unit ordered.

After all that, it’s hard to get excited about collecting profits.

That’s why we recommend an EverBank Select Metals Account.

First off, EverBank’s minimum deposit is 98% lower than its competitors, and its commission costs are up to 86% lower than other metals brokers and bullion banks.

Second, it offers two types of gold accounts:

• Unallocated: Your purchased gold is pooled with that of other investors, eliminating storage and maintenance costs. The minimum deposit amount for unallocated accounts is a scant $5,000.

• Allocated: You directly own the gold you purchase, held in your own private account. The minimum deposit for allocated accounts is $7,500.

Both types of accounts can be set up 24/7 online. But if you prefer the phone, call 866-326-6241, and be sure to give them the code 12608 when setting up an account.

PS. We should point out that the publisher of Money Morning has a marketing relationship with EverBank.

Source: The Five Best Ways to Invest in Gold Today

]]> http://www.contrarianprofits.com/articles/money-mornings-5-best-gold-investment-plays/4167/feed 0 http://www.contrarianprofits.com/articles/if-you%e2%80%99re-prospecting-for-gold-tell-them-ben-bernanke-sent-you/3901 http://www.contrarianprofits.com/articles/if-you%e2%80%99re-prospecting-for-gold-tell-them-ben-bernanke-sent-you/3901#comments Fri, 18 Jul 2008 16:47:47 +0000 Alexander Green http://www.contrarianprofits.com/articles/if-you%e2%80%99re-prospecting-for-gold-tell-them-ben-bernanke-sent-you/3901 U.S. Federal Reserve Chairman Ben S. Bernanke is caught between a rock and a hard place right now. Sure, he would prefer that you focus on “core inflation,” since it excludes sharply rising food and oil prices. But we all have to eat and we all consume energy.

It’s just a matter of time before core inflation starts rising alongside corn, wheat, beef and prices at the pump.

Ordinarily, the Fed would start raising rates to stave off higher prices.

But Bernanke really doesn’t want to be an inflation hawk right now. Raising rates would only make the already weakening economy weaker still. (Never good in an election year).

If Bernanke has to choose between a weaker economy and moderately higher inflation, I believe he…

]]> U.S. Federal Reserve Chairman Ben S. Bernanke is caught between a rock and a hard place right now. Sure, he would prefer that you focus on “core inflation,” since it excludes sharply rising food and oil prices. But we all have to eat and we all consume energy.

It’s just a matter of time before core inflation starts rising alongside corn, wheat, beef and prices at the pump.

Ordinarily, the Fed would start raising rates to stave off higher prices.

But Bernanke really doesn’t want to be an inflation hawk right now. Raising rates would only make the already weakening economy weaker still. (Never good in an election year).

If Bernanke has to choose between a weaker economy and moderately higher inflation, I believe he will choose higher inflation, hoping that he can put the genie back in the bottle once the economy is growing again.

Since gold traditionally rises with inflation, that means now is probably a good time to add to your holdings.

Here are the essential facts:

At one time the world’s monetary system was based on gold. It is a universally recognized store of value. It can be bought and sold in any country.

And it is scarce. There are 4 billion ounces of gold in people’s hands, enough to fill a cube 60 feet on a side. Of this, investors own 1 billion ounces, and central banks another billion, with the remaining 2 billion ounces accounted for by jewelry and other baubles.

Last year, more than 80 million ounces were extracted worldwide. Two-thirds went to jewelry makers and the rest to bullion.

If you want to own gold that you can touch, you can buy bullion. But there will be a markup when you buy it or unload it – and fees to store and insure it. The same is true of coins, especially with numismatics.

Understand, too, that while gold has been in a major uptrend over the past few years – hitting an all-time high of $1,030.80 on March 17 – shares of the natural-resource companies that bring the gold to market have performed considerably better. That isn’t likely to change.

Over the past 50 years, major gold mining companies have risen at an annual rate of approximately 12%. That’s better than the return of the Standard & Poor’s 500 Index, although the trade-off has been head-snapping volatility along the way.

Perhaps the most conservative way to buy blue chip mining companies is to plunk for a few shares of Market Vectors Gold Miners (GDX) Exchange Traded Fund.

An ETF, Market Vectors is linked to the AMEX Gold Miners Index and owns all of the world’s leading gold and silver mining companies. That means you can capture the performance of the entire sector in a single, well-diversified investment.

The annual expense ratio is one half of 1%. The shares can be margined or sold short – and there are options available for traders.

Here are some of the stocks among the Top 10 holdings:

• Newmont Mining Corp. (NEM).
• Freeport McMoRan Copper & Gold Inc. (FCX).
• Barrick Gold Corp. (ABX).
• Anglo American PLC (ADR: AAUK).
• Harmony Gold Mining Co. (ADR: HMY).
• Kinross Gold Corp. (KGC).
• Yamana Gold Inc. (AUY).
• Gold Fields Ltd. (ADR: GFI).
• Agnico-Eagle Mines Ltd. (AEM).

Right now the economy is weak – and the outlook for inflation is poor. But this is creating plenty of profit opportunities – if you know where to look.

So pick up a few shares of Market Vectors Gold Miners ETF – or talk to a resource broker.

Tell them Ben Bernanke sent you…

Editor’s Note: Alexander Green is Investment Director of The Oxford Club and Chairman of Investment U. To get Green’s actionable investment ideas three times a week – at no charge – sign up for the Investment U e-letter. If you join for free today, they’ll send you their latest special commodities research report: “Five Million Reasons to Load Up On Coal Now – and Three Easy Ways to do it.” You’ll find out why the standardized shipping container is driving coal demand through the roof -and how that’s delivering literal “boatloads” of profits to three companies. Just click here to have your report delivered in less than two minutes. Again, the report, and the service, both are free of charge.

Alexander Green appears as a guest author on today’s Money Morning.

Source: If You’re Prospecting for Gold, Tell Them Ben Bernanke Sent You

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