Is gold ready to turn a corner?

Shares in just about anything related to the precious metal have plunged over the last year. But rising inflation may revive the sector.

By Benzinga Nov 14, 2013 1:23PM

Image: Small Stack of gold ingots (© Anthony Bradshaw/Photographer)By Jonathan Yates


The chairman and founder of Barrick Gold (ABX), Peter Munk, is stepping down. 


For the shareholders, that move is coming way, way too late. Barrick Gold, one of the world's largest gold miners, is off by almost 50 percent for 2013.


That is certainly not atypical for that sector, though.


Shares of Goldcorp (GG), the largest gold company in the world, have fallen more than 40 percent over the last year of market action. SPDR Gold Shares (GLD), the main exchange-traded fund for the yellow metal, is down nearly 25 percent for 2013. 


Over the same time period, iShares Silver Trust (SLV), the main exchange-traded fund for silver, has declined by more than 30 percent.


That naturally raises the issue of whether it is time for long term investors to buy gold and silver securities.


"The last decade at Barrick has been marked by a series of strategic missteps," wrote Robert Baillieul at The Motley Fool. "The company bungled its way out of a commodity price-hedging program that cost investors billions. In a costly empire building campaign, Barrick purchased mine after mine at unjustifiably high prices. And its forays outside of precious metals and into copper resulted in a $4 billion writedown."


The company's accumulated deficit –- cumulative profits less dividends over the entire life of the company -– is $4.71 billion.


"Even when you add dividends back to that figure," Baillieul continued, "Barrick has generated barely any GAAP profits over its history as a publicly traded company. The tragic misallocation of capital has left the company saddled with nearly $16 billion in debt and almost nothing to show for it."


But that hardly means that gold and silver will never rise again.


In an interview in The Wall Street Journal, former secretary of state and Treasury secretary George Shultz warned about the threat of inflation due to the monetary policies of the Federal Reserve. Inflation is always bullish for gold, as investors lose faith in fiat currencies and seek shelter in precious metal assets.


Demand from India and China is also a huge positive factor, too. The two largest consumers, individuals and the central banks of the world's two most populous countries both prefer to invest in gold.


For companies like Yamana Gold (AUY) and Wishbone Gold PLC (WISHY) that have holdings in Australia, increasing demand from Asian markets should be very rewarding for shareholders. In a recent interview, Wishbone Gold Executive Chairman Richard Pouldon pointed out that Asian buyers now want the hard asset, not the paper security.


No matter what form, investors are looking at lower prices for gold and silver in the short term. But as former Secretary Shultz warned, inflation should be coming -- due to the quantitative easing measures being deployed around the world by central bankers.


If prices start rising due to inflation from monetary policy, so will the stock prices over the long term for Goldcorp, Barrick, Yamana, and Wishbone Gold PLC.


Read more from Benzinga

44Comments
Nov 14, 2013 2:21PM
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Sounds like a convincing case for investing in gold.  The exact same case, in fact, that was being made a year ago before the tumble.
Nov 14, 2013 2:38PM
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Why not add to long term positions of both gold and silver,

 as part of an overall diversified mix?

Just don't bet the farm.

 

If nothing else, the grandkid girls love to play with sparkly treasures!

Nov 14, 2013 2:49PM
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Let's face it --- The dollar was worth roughly 3/100 oz of gold in the early 1970's.
Now it is only worth less than 8/10,000 oz.

The paper fraud is and has been on for decades ----- CASE CLOSED

You best call your senators and demand a vote on the AUDIT THE FED bill before any fed governor is confirmed.  Otherwise your inaction becomes complicity in the fraud and you better not be YELLEN about inflation later.
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The govt is intentionally deflating the dollar by printing more to pay more bad debts. This keeps the price of gold down, and your wages. Its not just ammo and food the govt is stockpiling, its gold as well. Intentionally driving the dollar down along with stagnate wages , increase in the cost of goods and services, hmmm, wonder whats going on ?  What do you idiots think that voted  for this fool? 96% of blacks voted for Obama based on what? tsk tsk.. Yes I blame Obama for things that were already going down when he took office, for he promised hope and change. I don't often think of Zimbabwe, but when I do, I'm watching the president give a speech.. Stay thirsty my friends
Nov 14, 2013 2:31PM
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Historical gold valuation ratios are still way off. Silver seems like a much better bet right now.

Nov 14, 2013 2:41PM
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The use of gold has doubled. As electric cars come in to play many of its electronics are going to need connections that must be be gold plated as most computer card junctions. Even the expanded drone use have increased the need for gold. Silver although best conductor it does not sustain oxidation as good as gold. So I bought stocks in GOLD early on and took a bath but sitting and waiting the rest crowed to fell the chill.
Nov 14, 2013 6:36PM
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Evidently AllYourBase, YOU haven't been shopping at the supermarket lately. Maybe prices haven't gone up that much, but the sizes are going down, BIG TIME. THAT alone, is translating into inflation per pound, ounce, or whatever measurement your using, of at LEAST 10-12% per year. If YOU consider THAT very low or no inflation, I'd like to see YOUR definition of high inflation.

 

And for you thumbs down commenters.  Take out your calculators and do the damn math!!  If you CAN!! This shrinkage of product has been going on for YEARS!!! And it's a damn sneaky thing to do to consumers.

 

Remember the good old days when meat was measured by the QUARTER POUND [that's 4 ounces for you mathematical illiterates], then it went to being measured by the ounce, then the tenth of a pound and by the hundredth of an pound??

Remember when coffee and potato chips came in ONE POUND CONTAINERS OR BAGS??

Remember when candy bars were two and four ounce sizes? And more??

Take a look at your packaging and see how much they've shrunk.

THAT'S what inflation has done to your purchasing power.

 

It's NOT JUST RISING PRICES, IT'S SHRINKING PACKAGES.

And That's a BIGGER lie than the government saying inflation isn't high, because it's HIDDEN more.

Nov 14, 2013 4:49PM
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Benzinga? LOL. is that you Sheldon?

 

I'll keep my precious metals and wait it out. Sooner or later, precious metals will rip like never before. Sooner or later push will come to shove.

 

Obozo, Bernake and next Yellen I expect to destroy and continue to destroy the dollar. I read the comments, somebody mentioned the word "Audit". That would certainly make Gold rip, lets audit the Fed, and Fort Knox. No audit since 1952 and no audit of the Fed ever, you just know there's some dirt there. And how come Germany can't have their Gold back for several years. That's BS. It probably ain't there.

 

Just read the report by the Gold Council. China and India are going nuts buying Gold. USA is barely mid-list.

 

You know that expression "spending money like a drunken sailor" well Obozo was never in the service..

Nov 14, 2013 3:08PM
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yes Obama wont be able to stop printing money during his term because he doesn't know how to create jobs without printing money.Also he need to make more money inflating stocks of his financial supporters and  need to print more money for this.The only way gold can go down if senate send Obama out for illegal enrichment and inflating stocks of his financial supporters and that doesn't look viable now..gold can spike to $2000 soon.also Obama cheating people on inflation same as he did with obamacare
Nov 14, 2013 2:40PM
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Keep running these spin articles. Maybe you can attract some fools whose money is there for the taking. Oh wait... they're all in now. The whole world is grinding to a halt and when it does, all the fake money settles for a good reconciliation. Nothin' from nothin' is nothin'.
Yellen... keep printing until that meteor strike wipes out all life on Earth... maybe SHE caused the dinosaur extinction... looks old enough to. 
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The baby killin, homosexual transgender lovin libs just don't get it. They want to blame Reagan and Bush still. Sooner or later they'll have to live up to their own actions like Obamascare. Wow, I wonder how they'll pin this on republicans. Lets see, they hired republicans to do the web site maybe. Reagan rose from the dead, hmmm this excuse will be good. Better than the "I dont know" answer's they gave congress over fast n furious, Benghazi, NSA, IRS ( I"m innocent of any wrongdoing) but I"M TAKING THE FIFTH, the Syrian goof, etc.. This whole admin has been a sham and will go down as the least transparent of all. The libs have been gaining ground and this is what it has led to. Our enemies buy our weapons and burn our flag, our friends don't trust us and the value of the dollar weakens every time they open their mouths.  I don't often drive by the San Fran bath houses, but when I do, I think of the liberal progressive movement.  Stay thirsty my friends
Nov 15, 2013 12:51PM
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thanks psyched.  i wish i were just ranting.  i am an ungrad econ, cpa, cfp, mba (economics/finance), and ria firm (registered investment advisor) with over 45 yrs experience.  i've seen it all, including the 23% single day decline on black monday in october 1987 when all of the stop-loss orders became virtually worthless due to the rapidity of the sell off.

 

with the flash crashes and global connectivity of today, there will once again be nowhere to hide.  now we will continue to play the game until the end, but we also remain defensive and nimble - because the fed does not control the markets.  influences, yes, controls, no.  confidence and fear controls the markets.

 

how confident will investors be when we have no budget, we have no debt-ceiling limits, we have no end to money-printing, we have no end to artificially suppressed interest rates and of course no end to spending above our income?  when the game of musical chairs ends, the players not in the final chair (the ultra rich and banksters) will need to be collected in carts and hauled away.

 

recall - the definition of insanity is repeating the same actions and expecting different results.  when will this insane cycle of boom and bust to enrich the few be brought to an end?

 

oh, don't get me started ....

Nov 14, 2013 3:08PM
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In my opinion the "short answer" to the question is YES...

 

Some sneaky stuff going on behind closed doors, I think ?

And yes we, it has been down longer then 12 months..

A little upside in positions today of 2%+, in Gold and Silver miners.

Nov 14, 2013 6:51PM
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better have some gold and physical assets.

 

today takes us that much closer to the yellen coronation, a day that will live in infamy.  greenspan, bernanke and yellen - three successive dupes of the ultra-rich and big banks have been blessed by their legion of hired puppets in congress.

 

yellen and the coronation committee looked exactly like the three monkeys today: they see no asset bubbles (farmland at record highs, art selling in the hundreds of millions, stocks at all-time highs), they hear no evil (they believe that investors are "beginning" to look for yield by chasing high-yield bonds and dividends), and they will speak no evil (no end in sight for the QE infinity program).

 

the "race to the bottom" is on now, and all of the global central bankers have taken the bit.  who can debase and devalue their currency the quickest?  japan has the early lead, but many others are close behind and others will have to do extra just to catch up to the leaders in this foul, perverted competition..

 

we are ruining our credit and great nation, and in 2014-2015 this will all end in ignominy and perdition ....

Nov 14, 2013 6:57PM
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SPEAKING OF  The baby killin, homosexual transgender lovin libs 

WAIT TILL THE GAY GUYS GET THE OBAMACARE TAB FOR MATERNITY COVERAGE 
Nov 14, 2013 6:28PM
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Who's this writer: Benzinga? Really!?

Nov 14, 2013 3:39PM
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It doesn't matter if gold turns around as long as it stays at $1200-1300 per ounce miners with cash costs of $500-600 per ounce will do just fine.  Those all sustaining costs of $1100-1300 per ounce are just accounting lies to help with foreign contract profit sharing negotiations.
Nov 14, 2013 9:03PM
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Gold is a great investment......buy a bunch then seal it in your attic and let someone find it in a hundred years...yuk yuk.
Nov 14, 2013 5:13PM
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I think China may want to back their Yuan with Gold ??

That would put a scare or at least bring up questions in the currency world or Forex.

Nov 14, 2013 7:14PM
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I have been shorting precious positions for awhile.  Why?  Because in as much as gold is a pretty metal and has it's commercial uses, it doesn't really generate income, pay rent/lease, or even interest like other asset classes do while waiting for that turnaround in price.  Should the QEs discontinue, interest rates will rise and reward those buying interest sensitve investment vehicles while the price of precious metals languish like it did a couple of decades ago.  All PMs have is appreciation and if there is none, there will be no increase in price.
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