Gold bullionThere's no denying that gold has caught the fancy of most investors, dazzled by the tantalizing ascent of the precious metal's price to record highs. And the gold bugs have become ever more serious about gold's skyrocketing intrinsic value.

If you think it's too late to jump on the gold bandwagon, you'll get a lot of opinion to the contrary, even though on Tuesday, Oct. 19, gold slipped a bit because of the rally in the U.S. dollar. The greenback surged due in part to China's move to boost interest rates to tamp down rising inflation and curb speculative investments in the domestic economy.

"The China interest rate story caused some selling in gold, but it still remains above its bullish trend line," says James DiGeorgia, editor of the Gold and Energy Advisor, who's regarded as one of the industry's top gold gurus. He notes that gold's climb is tied to the value of the U.S. dollar and not to the rate of inflation in the U.S. And of course, the value of the dollar, he adds, is linked to the full faith and credit of the U.S. government.

"Not Thinking Clearly"

"It's the level of faith and credit of the U.S. government that's become a growing problem in the past 10 years, as gold has steadily risen," says DiGeorgia. Last year, when the precious metal was selling at $1,200 an ounce, he predicted that it would jump to $1,400 to $1,500 this year. On Oct. 14, the gold December future's contract closed at a record high of $1,377.

"Anyone who questions the wisdom of owning gold is not thinking clearly," says Charles Laloggia, investment and research consultant, who argues that the only thing that will stop gold from continuing to rise relative to the dollar is when the Federal Reserve Board decides to raise short-term interest rates to more historically reasonable levels. "That's not going to happen anytime soon," he predicts.

Even the big Wall Street houses are bullish on gold. ""We expect the price of gold to continue to climb," says Goldman Sachs Global Investment Research Division in a note to investors. So, it has raised its 12-month price forecast to $1,650 an ounce. "With the prospects for another round of quantitative easing in the U.S. increasingly strong, U.S. real interest rates continue to fall," notes Goldman. The Fed's "return to quantitative easing will likely be a strong catalyst to drive gold prices higher, and we expect the gold price rally to continue until U.S. monetary policy begins to tighten," argues Goldman.

Miners That Are Missing Out

One interesting aspect of the gold rush is that shares of gold-mining companies haven't skyrocketed as the price of physical gold has. They have, of course, climbed, but evidently, investors have yet to focus on gold-mining shares. That's led some investment pros to focus on mining stocks that they believe will participate more fully in gold's heady ascent.

"We still see value in the major gold miners," says Jared M. Levin, portfolio manager at investment firm A.R. Schmeidler, which has been a bull on gold and other commodities for the past several years. He believes these stocks have bright prospects for catching up with gold's climb. Schmeidler's top-three gold-mining picks are:

  • Barrick Gold (ABX), the world's largest gold-mining company in production and reserves, currently trading at $45.46 a share, close to its 52-week high of $48.99
  • Newmont (NEM), one of the world's largest producers of gold, as well as copper, currently trading at $59.93 a share, down from its 52-week high of $65.50
  • New Gold (NGD), which explores and develops gold properties in the U.S., Australia and Mexico, trades at $6.46 a share, down from its 52-week high of $7.53 a share.
Levin sees these stocks as still way undervalued, although they sport strong balance sheets and are trading at less than seven times future earnings before interest, rates, taxes, depreciation and amortization (EBITDA).

Analyst Leo J. Larkin of Standard & Poor's rates both Barrick and Newmont a buy, noting that the growing currency instability is boosting "gold's attractiveness as a monetary reserve asset." He sees Barrick climbing to $57 a share in a year and Newmont exceeding its 52-week high and hitting $68 in 12 months.

Bright Prospects at New Gold

Schmeidler's Levin, on the other hand, sees New Gold as the stock with the brightest growth prospects because it's still relatively small and headed by experienced industry leaders. At the helm of its management team is CEO Randall Oliphant, formerly CEO of Barrick Gold. Two members of its board of directors are former presidents of Newmont and Goldcorp (GG).

New Gold's growth has been 100% self-funded, and it has no need to reach out to the capital markets for further funding, says Levin. He forecasts the stock doubling, to $12 to $14 a share over the next two years.

New Gold is scheduled to open a new mine, New Alfon, in Canada's British Columbia, in mid-2012, which he estimates will help in doubling its cash flow from operations. Moreover, New Gold owns 30% of Goldcorp's El Morro mine, a giant gold and copper mine that Goldcorp expects will go into production in the next four years.

Canadian-based New Gold is one of the industry's low-cost producers, and it trades at a large discount to its net asset value, says Michael Jalonen, analyst at Bank of America Merrill Lynch, who rates the stock a buy with a 12-month price target of $8.75. Its goal, he notes, is to become a 1 million-ounce gold producer at a lower-than-average cost per ounce in the next five years, notes Jalonen.

So for investors who have yet to catch the gold fever, ample opportunities are still available to profit from the metal; which by all indications will remain precious for some time to come.

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As soon as Goldman Sachs begins touting gold as an investment it's time to get out.

October 21 2010 at 4:45 AM Report abuse +2 rate up rate down Reply

silver is the small investors GOLD, you don,t have to pay out a lot to get a 1/2 back when it hits 40 to 50 bucks a oz. Not to long ago 1 oz. silver sold for 6 bucks, and in the 80,s when the Hunt Bros. cornered the market on Gold silver hit 55 bucks a oz. Longer you wait to see if it goes up the less profit you will get when you sell. Buy all the silver your bank account can stand.

October 21 2010 at 2:50 AM Report abuse rate up rate down Reply

buy as much silver as you can it will reach 50 bucks a oz in a little while. If you bought Canada Maple 99.99% Leaf coins at even 20 bucks each, the price is at today at $26.40 you would have made $ 6.40 profit off each 1 oz. coin if you sold them today. Spot silver if you bought at 12 bucks a oz. hit just under 24 bucks a oz. today, not bad for a 12 buck investment.

October 21 2010 at 2:42 AM Report abuse +1 rate up rate down Reply
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October 20 2010 at 9:38 PM Report abuse -2 rate up rate down Reply

So say the people who have gold to sell

October 20 2010 at 9:01 PM Report abuse +1 rate up rate down Reply

Gold is not going up in value, the Dollar is dropping in value. The Fed is printing money like mad and it will drive the Dollar down much farther. The euphemism "Quantative Easing" means PRINTING MONEY! Every time the Fed prints money your savings become worth less, your paycheck becomes worth less, your Social Security check buys less, etc. END THE FED!

October 20 2010 at 7:49 PM Report abuse +7 rate up rate down Reply
1 reply to rickpetersonms's comment

You are 100% correct.

October 20 2010 at 8:13 PM Report abuse +4 rate up rate down Reply

small investors start grabbing up all the silver coins you can stand to buy, dimes,quarters, 1/2 dollors anything up to 1964 were silver coins., walking liberty,s, silver eagles, Kennedy halfs, When the big melt comes and it will those horded coins will be worth a lot of cash.

October 20 2010 at 7:30 PM Report abuse +2 rate up rate down Reply

Another stist to this silver and gold story is the not only hedging against the short USA dollor. One of the biggest money making industrys in this country and the world is collecting currency ITS HUGE. Old silver coins of ANY KIND will be worth as much as 500% higher than face value WHEN silver hits 50 bucks a oz. Many coins will be melted down just like the Morgan dollors that went to the melting pot years ago. The dates that escaped the pot and sold on the market to day are up 1000% there dollor face value and silver value. ALL the dates in a morgan dollors set in very good condition sell for approx. 20 grand and in ex. fine condition 30 grand, and there isn,t that many dates they stamped the morgans. Same with a mercury silver dime..1928 D dimes in good condition sells for $1,000 bucks each because they are scarce. and many other silver coins bring 30 to 150 bucks each ALL DAY LONG. YOU want to become a millionare have rolls of KEY DATES in a safty deposit box, wait untile the HUGE MELT comes and it will. Call a Laywer to sell them on the open market. One little roll of key date mercury dines will bring 20 grand each roll. And don,t fore get about those silver eagles they will go up 50% in the next 2 years. even a 2007 silver eagle will sell for 150 bucks each. after the big melt comes.

October 20 2010 at 7:24 PM Report abuse +2 rate up rate down Reply
2 replies to ronsjigslures123's comment

I have a few 1928 D mercs. that I will sell you for half of your price. I could go to any coin store and get plenty more of that date at a lot less than you stated. Coins are like anything, if there are only a few made then it is worth more, only makes those of us who save them want them more. Gold and silver will continue to go up as long as the economy is upsidedown just as it did in the 80s

October 20 2010 at 9:00 PM Report abuse -1 rate up rate down Reply

why would you call a lawyer to sell coins?

October 20 2010 at 11:48 PM Report abuse +1 rate up rate down Reply

Silver and Pladdium is the best buy for the small investor, both can be had for a ok price, even now days. Silver will reach 50 bucks a oz. and Gold will hit 2 grand a oz. at TAX time in 2011. Remember gold, pladdium, and silver are not all used for Jewery its used in most of the electronic items we buy. When this world starts to get some what on track again the demand for these metals will shoot threw the roof, those that are holding the stuff will get paid dearly for it. China is hold lots of silver, they bought it at a low price, they will need lots of it as they become the masters of this world in manufacturing products, India will need tons of the stuff also.

October 20 2010 at 7:08 PM Report abuse +2 rate up rate down Reply

Gold like everything else tends to have it' good an bad days. But overall___Gold and Silver will continue to move higher because of: 1) Too much Federal Debt. 2) Too much debt in European nations. 3) A shrinking US economy. In reality___ Gold has not increased in value, instead it remains almost constantly at the same value. In 1970 it required about 10 ounce of gold to buy a new automobile and it still takes about 10 ounce of Gold to buy a new automobile today. Gold is not increasing___But instead the buying power of the US dollar and other currencies are falling. Gold is always exactly what it is___Gold. If you buy a 100 troy ounce bar of gold it will still be the same 100 Troy ounce bar of gold next year or in 5,000 years from now. Back in 1960 a $1 dollar bill could buy 1 quart of milk, plus 5 pounds of potatoes plus 1 loaf of bread and have change left over. Today the combination of those same 3 items costs around $6.00___the difference is how much the dollar has shrunk in buying power. Gold is not up, the value of currency is down.

October 20 2010 at 6:51 PM Report abuse +3 rate up rate down Reply