Tags: Gold | Mining | Stocks

WSJ: Good Time to Buy Gold Mining Stocks

By    |   Tuesday, 20 Sep 2011 08:26 AM

While it’s difficult to use fundamental analysis to determine fair value for gold, you can use statistics to try to come up with an intrinsic value for gold mining shares, The Wall Street Journal reports.

And there’s a strong argument to be made that those shares are undervalued, writes Jason Zweig of The Wall Street Journal.

With gold down only about 5 percent from last month’s record highs, several big gold-mining companies, including Barrick Gold and Newmont Mining, trade at only about 14 times their trailing 12-month earnings, slightly lagging the 14.5 price-earnings ratio for the Standard & Poor’s 500 Index.

And shares of gold miners overall are trading at one of the lowest ratios ever to the price of the precious metal itself.

"We haven't seen [low] valuations like these since 2008," Joe Foster, a gold strategist at money manager Van Eck Global, tells the Journal. Yet financially, gold miners have "never been in better shape."

Mining companies should see profits rise as long as gold stays above $1,500 or $1,600 an ounce, John Hathaway, manager of the Tocqueville Gold Fund, tells the Journal.

The mining shares have "a lot to gain if the [gold] price can be sustained for an extended period," Alexander Hacking, an analyst for Citigroup, wrote in a report last month obtained by Bloomberg.

And even a gold price drop may have little impact on mining stocks, because they haven’t gained a lot, he says.

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While it s difficult to use fundamental analysis to determine fair value for gold, you can use statistics to try to come up with an intrinsic value for gold mining shares, The Wall Street Journal reports. And there s a strong argument to be made that those shares are...
Gold,Mining,Stocks
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2011-26-20
Tuesday, 20 Sep 2011 08:26 AM
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