A Safe Play For $2,000 Gold Prices (GLD, IAU, GDX, GG, DZZ)
Yiannis Mostrous: The case for investing in gold (NYSEArca:GLD) remains strong: The EU sovereign-debt crisis continues to drag on, while the US economic recovery remains anemic relative to most postwar economic cycles. Meanwhile, central banks purchased about 400 tons of gold last year and will likely add to their stockpiles in 2012.
In late August 2012, gold (NYSEArca:IAU) reached its most recent high of $1,889.70 per ounce. A sharp decline (NYSEArca:DZZ) from this peak prompted some investors to question the sustainability of the bull market. But the consensus tends to forget that the rush to gold, which began in 2001, has endured its share of ups and downs along the way.
Given the structural challenges facing the major developed economies, investors should regard weakness in gold and other rare metals stocks as a buying opportunity. I expect the supply-demand balance for gold to tighten in 2012 and have tipped the yellow metal to top $2,000 per ounce this year.
Goldcorp (NYSE:GG), which operates primarily in the Americas, remains my favorite large-cap gold producer (NYSEArca:GDX). Management’s forecast calls for the company to grow its gold output to 2.6 million ounces and its silver output to 34 million ounces in 2012. Goldcorp also produces significant amounts of copper, lead and zinc. The firm boasts some of the lowest production costs among its peers.
The company expects gold production to grow to 4.2 million ounces—a 70 percent increase—over the next five years. Goldcorp recently made a final investment decision on the El Morro gold and copper project in northern Chile, a $3.9 billion endeavor that should produce its first gold in late 2017. Management estimates that the mine’s production will average 210,000 ounces of gold and 200 million pounds of copper annually during its 17-year life span.
The stock trades at a premium to its peers, which is justified by the company’s high-quality assets and potential output growth. Rising production costs should be more than offset by higher gold prices. For more tips and analysis, check out my free report on the top gold stocks to own now.
With his experience in international market analysis and venture financing, Yiannis G. Mostrous is more than just a world traveler; he’s also an expert on identifying investment opportunities in emerging and overlooked markets—the places most of us only see on television. As an analyst with Artemel International, Mr. Mostrous worked with developmental institutions to promote business development in the Mediterranean, while as an associate in the venture capital Finance & Investment Associates was involved in analyzing start up companies’ business plans evaluating their potential while bringing together worthy candidates and angel investor groups.
Since joining Investing Daily, Mr. Mostrous has dedicated himself to helping individual investors bolster their returns and give their portfolios an international flavor. In his financial advisory Global Investment Strategist, Mr. Mostrous identifies top Asian stock market opportunities in fast-growth economies including China and India. Mr. Mostrous has an MBA from Marymount University with a major in Finance and a BBA from Radford University focusing on investments in natural resource markets around the globe. More recently, Mr. Mostrous was lead author of The Rise of the State: Profitable Investing and Geoplitics in the 21st Century.