Software & Finance - Monthly Magazine Online

Volume 3 - Issue 12

December 2013

Economics - Gold Miners are great bargains in the stock market


Nov 26, 2014 GDX closed today at 21.66. GDX is the Gold Miners Exchange Traded Fund by Market Vectors.


Gold mining sector is the most disliked sector currently. It is down by more than 52% year to date. It is not a surprise since Gold Mining stocks are more volatile compared to Gold. When gold prices moves up, gold mining stocks will move up much higher percentage compared to Gold.


Why Gold Miners are the great bargains in today's market? The reason is Gold is trading at 1243 as of Nov 26, 2013 8 PM EST. The average cost of producing one troy ounce of Gold is around 1250. Any price less than 1250 would hurt the profits for the gold mining companies. But the Gold Price will not stay below 1250 in the long term since the mining companies will reduce its production of Gold by creating a supply shortage.


When there is a supply shortage, there will be a panic buying in Gold. There is no surprise if you see gold prices trading above 2000 US$ per troy ounce.


Buying the Gold Stocks might be costly compared to Gold Mining Stocks. If you would like to go with leveraged ETFs, NUGT would be the perfect choice. Going long on NUGT along with hedging with put options, would be a very nice strategy to make money from the market.