In fact, it has been an awful few days for gold as prices plummeted, failing to reach $1,500 an ounce.

Prices dove right through support at $1,400 to $1,385.62 on Monday—the lowest level since 2011.

The shining yellow ore is in a bear market. Down 27% from its magical peak of $1,920 in September 2011, it has been nothing but turmoil for investors in the yellow metal.

As I said in a recent commentary, I have lost confidence in the metal as a safe haven investment at this point. I’m not even sure I would enter on the current weakness.

The price chart says “sell.” Follow the trend, and you may be able to squeeze out some profits on an oversold bounce trade; but extending the trend forward, things don’t look good for gold.

Now we will need to see if the precious metal can hold $1,400.

As we move lower, there are now concerns of a meltdown in the gold sector, especially if prices continue to trend lower toward the $1,200 level.

Goldman Sachs, which recently turned bearish and advised shorting the metal, is fearful of gold prices dropping to the $1,200-an-ounce level—as this level also represents the cash cost to produce gold at this point. (Source; Cosgrave, J., “The Scary Number for Gold Investors: $1200,” CNBC, April 15, 2013.)

The $1,200-an-ounce cost of production is clearly an issue, especially for the smaller mining companies that are not as cost-effective or able to survive a cash crunch, compared to the mid- to large-tier producers, like Newmont Mining Corporation (NYSE/NEM). (Read “Newmont—the ‘Best of Breed’ of All Gold Stocks.”)

Take a look at the chart below of the Gold Bugs Index comprising a basket of unhedged gold stocks; as such, this index is a good indicator of the movement of prices in gold due to the lack of hedging.

If you hold mining stocks that hedge very little, you could be in for more losses should prices fall, so check the company’s hedging program.

Chart courtesy of www.StockCharts.com

Of course, the steady rise in the stock market has been a killer.

You can partly blame the Federal Reserve and central banks around the world for the easy money and associated movement of money into stocks.

In the chart below, notice the relative divergence (indicated by the blue lines) between the move of the S&P 500 since November 2012 and the downward slide of gold.

Clearly, the equities market and the yellow metal are moving in opposite directions, based on my technical analysis.

Chart courtesy of www.StockCharts.com

I would be careful about entering into gold at ... Read More

I can see gold breaking to $1,800 an ounce, something that nearly materialized on October 5, 2012, when the price of cash gold traded at $1,795.78 prior to slipping. In fact, the previous time the precious metal was trading above $1,800 was on November 8, 2011. We could see a move above, given the eurozone mess, U.S. debt and fiscal cliff, and the mixed results in China.

Silver is holding at around $30.00 an ounce, but I’m not as bullish on the white metal, as the price is largely driven by the direction of the global economy.

I continue to like gold going forward, given the financial crisis in the eurozone; trust me, it is not going to get better anytime soon…it could even take years. Moreover, with a recession holding in the eurozone, the crisis could deepen and impact the global economy.

Across the Pacific, there are some encouraging signs in China; but prolonged weakness in the eurozone and Europe will negatively impact China along with the other Asian countries, like South Korea, Japan, and the smaller emerging Asian markets.

For those of you who took my advice to hold on and accumulate gold on weakness down to $1,600, it has been a nice ride. In my view, major price weakness should be viewed as an opportunity to accumulate the yellow metal in 2013, unless $1,600 can’t hold.

I favor the metal plays and continue to see opportunities, especially in the mining companies and junior gold miners.

China and India continue to be the world’s top buyers of gold, and this is expected to continue. China has also been buying mining companies around the world in an effort to increase its reserves. This is a reason why I like some of the smaller mining companies, especially those with a massive reserve of proven metals in the ground, waiting to be developed and needing a cash-rich partner to get the ore out of the ground.

You can buy the major gold players, such as Freeport-McMoRan Copper & Gold Inc. (NYSE/FCX), Barrick Gold Corporation (NYSE/ABX), and Newmont Mining Corporation (NYSE/NEM), but for the really big gains, you need to own some of the smaller miners. (Read more about Newmont; see “Newmont—the ‘Best of Breed’ of All Gold Stocks.”)

If you want to play the small mining companies, there are hundreds of plays.

I have listed several small mining stocks that look interesting for the speculative trader. Please keep in mind that these stocks ... Read More

Earnings season is just around the corner. Alcoa Inc. (NYSE/AA) will be the first Dow stock to report in the fourth-quarter earnings season, as it kicks off with its results on January 9, 2013. The company is one of the world’s top aluminum makers and a good indicator for the global economy, as aluminum is used in many industrial applications, including aircraft, automobiles, commercial transportation, packaging, building and construction, oil and gas, defense, and consumer electronics applications. In the precious metals area, I like Newmont, which you can read about more in “Newmont—the ‘Best of Breed’ of All Gold Stocks.”

In the third-quarter earnings season, Alcoa beat on Thomson Financial consensus earnings, but revenues are an issue, which will likely be the situation with many U.S. companies. For Alcoa, revenues are estimated to fall 6.3% in the fourth-quarter earnings season, followed by a 1.3% rise in the 2013 first-quarter earnings season, according to Thomson Financial.

For the fourth-quarter earnings season, the overall revenue growth is estimated to be three percent, according to FactSet. (Source: “Earnings Insight: S&P 500,” FactSet, December 14, 2012.) This is simply not what you would expect if the economy was healthy. And while there is some hope and optimism for the fourth-quarter earnings season, I expect disappointment.

Based on current estimates, earnings for the S&P 500 are estimated to rise three percent in the fourth quarter, according to FactSet. So far, for the fourth quarter, 79 S&P 500 companies have issued negative earnings-per-share (EPS) guidance, versus only 30 companies reporting positive guidance. (Source: “Earnings Insight: S&P 500,” FactSet, December 14, 2012.)

FactSet also predicts that the top-performing earnings growth for the third quarter earnings season will be in the financial sector.

The two weakest areas of earnings growth in the fourth-quarter earnings season are predicted to be the industrials and information technology sectors.

As in the past quarters, the key in my stock analysis is determining whether companies are growing revenues to drive earnings or cutting costs to support earnings growth. This is critical and could give us a good indication on how well corporate America is actually doing. Based on the soft gross domestic product (GDP) growth, I’m not expecting any major upside surprises.

The reality is that many companies cut costs during hard times, ... Read More

For any gold investor, the question is whether to buy the physical bullion or gold mining stocks. If you like the idea of holding the actual gold, you can always fly to Dubai and buy the metal from the vending machines, like Michael outlined yesterday in his article. But for the average investor, I favor gold stocks over the higher risk of other commodity options.

An investment strategy would be to buy a mixture of exploration-stage gold mining stocks along with small to large gold producers. Under this scenario, you can play both the potential aggressive gains of exploration stocks and the steady returns of the large gold producers.

For investors interested in exchange-traded funds (ETFs), the SPDR Gold Trust ETF (GLD) is worth a look and is currently trading in a sideways channel, above the 50- and 200-day moving averages (MAs).

 Chart courtesy of www.StockCharts.com

At the top of my list of gold stocks is Newmont Mining Corporation (NYSE/NEM); in my view, Newmont is one of the best stocks in gold, because this stock will generate value for your portfolio for years to come. I’ll go even so far as to say that this stock is the only one you will need to own for the next decade, with its good price appreciation potential and dividend.

Missing its earnings-per-share (EPS) estimates in three of the last four quarters, Newmont is down to just above its 52-week low of $42.95 and, with the selling, I feel the stock has good above-average upside potential.

 Chart courtesy of www.StockCharts.com

Without a doubt, for those investors looking to hedge their portfolios with gold exposure, Newmont deserves to be at the top of the list. This company stands out among other players for two reasons: 1) size; and 2) low production costs.

Over the years, Newmont has grown rapidly through mergers and acquisitions, as well as through the development of its existing reserves. This strategy resulted in the company’s diversified risks; namely, unlike junior producers, Newmont doesn’t depend on one or two of its mines for its future, and it’s certainly not exposed to politically unstable regions. The risk is spread out, as the company continues to maintain an aggressive worldwide exploration program and actively participates in and takes advantage of the ongoing industry consolidations.

In terms of costs, Newmont enjoys an overall favorable cost structure. Its South American operations are a key reason ... Read More

With the current weakness in gold, I do not feel it is time to dump gold stocks and I believe major price weakness should be viewed as an opportunity to accumulate stocks.

I favor the metal plays and continue to smell opportunities, especially in the mining companies and junior gold miners.

China and India continue to be the world’s top buyers of gold and this is expected to continue. The Chinese have also been buying mining companies around the world in an effort to increase the country’s reserves. This is a reason why I like some of the smaller mining companies, especially those with a massive reserve of proven metals in the ground waiting to be developed and needing a cash rich partner to get the ore out of the ground.

You can buy the major gold players such as Free port-McMoRan Copper & Gold Inc. (NYSE/FCX), Barrick Gold Corporation (NYSE/ABX), and Newmont Mining Corporation (NYSE/NEM), as I discussed in The Gold Stock at the Top of My List, but for an opportunity for some real big gains, you need to own some of the smaller miners.

If you want to play the small mining companies, there are hundreds of plays.

I have listed several small mining companies below that look interesting for the speculative trader. Note that these are not specific recommendations to buy these stocks at the moment; just a list of promising mining companies to look into.

Small-cap gold miner Jaguar Mining Inc. (NYSE/JAG) is an interesting miner. The stock surged in late 2011 on news of a potential $1.0-billion takeover bid from China-based Shandong Gold Group, but the bid never came to fruition for whatever reasons.

Keegan Resources Inc. (AMEX/KGN, TSX/KGN) continues to report positive feasibility results specifically at its Esaase Project in south west Ghana. I like this stock as an aggressive small-cap play with above-average price appreciation potential.

Another I like is Canada-based Taseko Mines Limited (AMEX/TGB), which mines for copper and gold in Canada. The small-cap has a market-cap of $679 million and is profitable with above-average price appreciation potential. With it trading at 5.78X its estimated 2013 earnings per share (EPS) of $0.60, I like the value here.

Take a look at small-cap Golden Star Resources Ltd. (AMEX/GSS). The gold company has operating mines …

The charts of the key stock market indices remain strong, but only the blue-chip Dow Jones Industrial Average is showing a bullish golden cross, with the 50-day moving average (MA) above the 200-day MA. And, despite bullish near-term signals, the NASDAQ, S&P 500, and Russell 2000 are holding on to a death cross, in which the 50-day MA is below the 200-day MA.

A bullish event on the charts occurs after the key stock indices have peaked on three successive upward moves with lower peaks; stocks have broken higher and suggest more gains.

And, as I said, the light volume on up days is a red flag and indicates stock market risk. The end result is a bearish divergence forming between price and volume, adding to the stock market risk.

The European debt crisis continues to be a major risk factor. The talks between Greece and its creditors to reach a debt swap deal have yet to be done and there is speculation that the country will be allowed to have a form of controlled default. The problem is that this would likely send jitters through the eurozone and global markets, wreaking havoc.

My advice is to ride the upward moves in the stock market, but make sure you have put hedges in place to protect your gains. It’s also never a bad idea to take some profits.

The mining area continues to be positive in my view this year.

Metals are strong, with gold back above $1,700, while silver powered above $33.00. Copper also edged higher, hinting at an economic recovery, as the metal is used in many industrial applications and is often seen as a barometer on the global economies.

February Gold is at $1,725 and above its 50-day MA of $1,667 and 200-day MA of $1,642 on stronger Relative Strength. Gold is overbought, so look for selling pressure.

My advice to you is to buy a mixture of exploration-stage gold mining stocks along with small to large gold producers. In this scenario, you can play both the potential aggressive gains of exploration stocks and the steady returns of the large gold producers. Buy gold and silver stocks on weakness. SPDR Gold Trust ETF (GLD) is worth a look.

I like silver as a trade, but …

The perennial question for any gold investor is whether to buy gold bullion or gold mining stocks. I favor gold stocks over the higher risk of other commodity options.

While generally favoring gold stocks, I view Newmont Mining Corporation (NYSE/NEM) in particular as a strong example of the type of stock that should bring value to your portfolio for years to come.

Without a doubt, for those investors looking to hedge their portfolios with gold exposure, Newmont Mining deserves to be at the top of the list. This company stands out among other players for two reasons: 1) size; and 2) low production costs, even in the rising price environment.

Over the years, Newmont has grown rapidly through mergers and acquisitions, as well as the development of its existing reserves. This strategy resulted in the company’s diversified risks; namely, unlike junior producers, Newmont doesn’t depend on one or two of its mines for its future and it is certainly not exposed to politically unstable regions.

In that regard, the risk is spread out, as the company continues to maintain an aggressive worldwide exploration program and is actively participating in and taking advantage of the ongoing industry consolidations.

In terms of costs, Newmont enjoys an overall favorable cost structure, although the recent quarter painted a very bleak picture when it came to capital expenditures. Its South American operations are the major factor in keeping the company’s costs down. This is particularly true with the Yanacocha property in Peru, where cash costs are in the lowest-per-ounce price range.

The company’s diversified portfolio of low-cost mines allows it to remain profitable, even during prolonged weakness in the gold bullion market. In the past 10 years, Newmont has posted net losses three times, yet each year it has generated positive operating cash flows.

Over the past five years, Newmont’s investment rate has been around 60% (investment rate is the percentage of profits the company has returned back to its business operations).

This strategy is consistent with what most producers do; return every dollar earned, and then some, back into the operations. However, with Newmont, it seems to come with ease, adding further to its attractiveness, as it can grow even…

First, it hit its all-time high of $1,030 an ounce in early March.

Just three months later, the price of gold for December delivery fell to $681 an ounce, a 21-month low and 33.9% drop from its record high.

Most gold bugs were equal…

Proactive Investors Report

The information below is based on the most recent information we have received from analysts and the companies participating in The Gold Report. We encourage you to visit the company’s web site for updates.

“Another smaller, less diversified but very interesting play is African Gold Group, Inc. (AGG.V). They’re in two African nations, Mali and Ghana both of which have raised some political concerns in the past. But I’ve recently met some of their government resource people, and believe that they want the employment and foreign exchange that new commercial mines bring. Historically these properties have been operated by locals with pick-and-shovel. It’s an interesting speculation, which if things go very well, will trade at $5.00 in three to five years—up from under $1.00 now. If things go badly, you could lose 1/2 or ¾ of your investment. But you don’t need to buy a lot when the potential returns could be a quintuple. You don’t need a big exposure to get a meaningful return. We never put more than 1% of a portfolio into such ventures—but we make sure we hold at least 5 different ones so the winners much more than make up for the losers. Luckily there are a lot of stocks like that, I’m just giving you a few examples.” (6/6/08)
- The Gold Report Interview with Alfred Wirth

“With mining investments in Africa expected to climb from $7-billion in 2006 to $14-billion by 2010, the political stability offered by countries like Ghana make West Africa one of the more mining-friendly regions and should continue to encourage activity there. Ghana is Africa’s second-largest gold producer after South Africa and has an established democracy.

Much of West Africa’s gold comes from the Birimian greenstone belt on the West African Shield, home to the famous Ashanti gold belt. Big industry players like Newmont Mining Corp. and AngloGoldAshanti Ltd., have been joined by juniors…like African Gold Group Inc. (Ghana and Mali) and several others.

African Gold and Keegan appear to be the most under-valued, according to Sam Kiri of Proactive Investors, which provides a wide range of information focusing on small cap companies.

African Gold, meanwhile, has seen healthy levels of mined resources at its neighbour’s projects in Ghana. The company now control’s one of those companies, Bonte Gold Mines.” (5/1/08)
- FP Trading Desk

“Toronto-listed African Gold Group provides exposure to both Ghana and Mali. The company has nine gold concessions that are consolidated into five separate exploration projects – three in Ghana and two in Mali. AGG’s Asankrangwa project is in the northern segment of the Asankrangwa gold belt, which is located midway between the Ashanti and Sefwi gold belts in Ghana.

Immediately to the south of AGG’s Manso Nkwanta concession in the Asankrangwa project, Resolute Resources mined approximately 30 million tonnes of ore grading 2.0 g/t Au from a number of pits. Immediately to the west and draining from the contiguous Assuowunu concession, Bonte Gold Mines produced approximately 500,000 ounces of alluvial gold from 1992 to 2002. Keegan Resources now control Bonte Gold Mines. AGG’s surface exploration program at its Assuowunu concession has identified three main gold-in-soil anomalies that trend into Keegan’s contiguous Esaase concession.

Recent assay results from AGG’s recently acquired Manso Atwere concession has returned 84 Meters Of 3.0 G Au/T, Including 36 Meters Of 6.28 G Au/T & 16 Meters Of 13.6 G Au/T. Diamond drilling is currently underway at Manso Atwere concession and will shift to AGG’s Assuowunu concession.” (4/28/08)
- resourceinvestor.com

“It is hard not to get excited about AGG. Flanked by producing properties in prolific mining districts including the world famous Ashanti Gold Belt, the company has 12 gold concessions that are consolidated into five distinct standalone exploration projects - three in Ghana and two in Mali. Extensive development activity is currently underway on three of its standalone projects and so at this time it certainly appears that AGG warrants a closer look.”(3/3/08)
- proactiveinvestors.com

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