True, they're different, but virtually all Gold Majors (NEM, ABX, PDG, etc.) move with Spot Bullion virtually tick-for-tick. Admittedly, however, the volatility/sensitivity of Majors' stock prices to Bullion fluctuations varies with the timing within the Gold cycle. Hedging isn't as important a function as it was even a year ago. Many millions of in-the-ground ounces have been committed through hedging but the Majors have forsworn further hedging and are now selling on the spot market - without any significant adverse effect YET. Hedge books have been hugely reduced this year. Outstanding derivatives, however, are another matter. Gold-related derivatives represent many times the value of gold production and could unwind in a disastrous fashion if Bullion rises too quickly. Governments are aware of this and are unlikely to let Bullion run away. Remember Long Term Capital Management? On the other hand, if Gold becomes a fashionable target for pension funds, even a small percentage of the resources of the pension funds in the U.S. alone could eat up all the above-ground gold in the world - including everything in Fort Knox and every other Central Bank store - many times over. In this scenario Government would be powerless to stop an upward spiral in Bullion. It's complicated - and potentially explosive.
...you might be surprised. <img src="http://www.elitetrader.com/vb/attachment.php?s=&postid=381878"></img> source: http://www.treas.gov/tic/exhibitsc&d.pdf
I year from now the all of the major averages will be the same as now, but gold will probably be around $500...what is the best company to put your $$
If we accept your premise that the averages will be as they are now while gold has risen to 500.00, the implication is that the U.S.$ will be even lower than it is now - but not drastically so. Your scenario also implies relative stability in the economy and currency markets. In such a setting, you're probably best off sticking with a stock that's prospering in the current environment. The Gold Majors that do most of their mining in countries that have strong currencies (South Africa, Canada, Australia) will do relatively poorly because their production costs will not fall with the USD. On the other hand, any company that mines primarily in the U.S. itself and/or in Latin America will do well. Latin America, of course is always a bit tricky for political reasons. You'll have to do your own research here, but I suggest you look for a company that does the majority of its mining in the U.S. and has debt denominated in U.S. dollars. I don't know of any Major that operates exclusively in weak-currency countries. I do know that Placer Dome (PDG) is generally regarded by analysts as the best Major (at the moment), but even Placer (whose debt is in U.S.$) has exposure in South Africa, Canada, and Australia. They also mine in the U.S. and Latin America. They're everywhere. Meanwhile, Gold appears to be in a rising wedge pattern (that's bearish) and might pull back sharply from 400.00 before advancing (but who really knows? - patterns can morph into anything). I am not an "investor"; I trade strictly very short-term so that I have no need for much knowledge of company fundamentals. Sorry I can't be more specific. PDG is a pretty good bet, but you might find something much better if you research. Let me finish by saying that I'm not convinced that gold is going directly from here to 500.00 or that the markets will be stable over the next 12 months; all I'm saying is that if you are going to make a move based on your assumptions, look for a company that has a strong presence in the good ol' U.S.A.
I have reason to believe that tomorrow 12/11/03 will be a low for gold stocks and is a good time to buy them. I think the gold will still stay bullish for a while.
and for how long might you hold them or risk % vs reward % ? note ... I got long NEM today and am underwater but partly hedged with a short of comex mini gold
========================================= Looks like loss cutting/profit taking for some around $110, for $xau ; for Nem,$50. Thats my first choice also , picture perfect confirming volume; fortunately dont need it for profitable uptrends like $xau, NEM or downtrends. The streets are paved with gold.