A rally in gold stocks...great read
Get ready for a rally in gold stocks
The rally in the U.S. dollar has taken a bite out of gold, but recent history suggests a reversal of fortune for yellow metal prices and shares in miners that explore and produce it, says a new report from Raymond James analyst Brad Humphrey.
Over the past few weeks, the greenback has strengthened dramatically, particularly against the euro that has been hit hard by sovereign debt woes in Greece. Up roughly 8%, it has become a safe haven for investors at the expense of gold, which has fallen 11%, and gold stocks, down 22%.
Mr. Humphrey said there have been three other similar "safe haven " rallies since the 2007 credit collapse. On average during these periods, the U.S. dollar rose 13%, versus a 9% drop in gold and 28% drop in gold stocks.
Following these rallies, he added, the greenback fell 9% on average, while gold rebounded 11% and gold stocks climbed 37%.
"Although historic performance cannot be applied as a forward guide, we would highlight that these three recent periods of USD strength have provided an excellent entry point into gold equities, noting also that during the ensuing rally the equities have offered more than triple the upside than investing in the metal itself," the analyst said in a note to clients.
In the recent sell-off, Mr. Humphrey said Yamana Gold Inc., Lake Shore Gold Corp., Golden Star Resources Ltd., Aurizon Mines Ltd., and Aura Minerals Inc., have suffered the most.
Hard hit companies will often attract buying interest given their underperformance, he wrote.
link:
https://network.nationalpost.com/np/blogs/tradingdesk/archive/2010/02/11/get-ready-for-a-rally-in-gold-stocks.aspx#ixzz0fHWFZINN