BCA Research: Gold Stocks Coiled for Upward Reversal
Thursday, February 7, 2013 11:19 AM
By: John Morgan
The continued sell-off in gold stocks probably represents a low in investor sentiment, which is typical of major bottoms and likely means an upward reversal in gold stock prices is ahead, according to BCA Research, a Canadian research firm closely followed by institutional investors.
BCA noted gold equities are trading near 2007 levels, despite a twofold increase in the price of gold.
“Investor disappointment over the past three years has left gold equities cheap, unloved and under-owned,” BCA said in a blog on the firm’s website.
Meanwhile, Investment U Research’s Mike Kapsch went one better than BCA, boldly predicting gold stocks present the “biggest buying opportunity in 25 years.”
Kapsch said some major gold miners trade for less than the current value of the actual amount of gold they have on hand — excluding probable reserves.
Their current valuations also leave out any other mineral reserves they may have, such as silver, copper, lead and zinc.
“The bottom line: right now could be one of the best buying opportunities you’ll ever find for some of the world’s biggest gold miners,” Kapsch wrote.
Kapsch singled out for positive mention the stocks of Barrick Gold, Goldcorp, Newmont Mining, Kinross Gold and Yamana Gold — most of which he noted are down by double-digits over the past two years.
BCA said gold stocks have been “cannibalized” by a surge in volumes in physical gold exchange-traded funds (ETFs), forcing the stocks’ price-earnings multiples to move inversely with ETF flows. “Part of the reason is that during times of extreme risk aversion and safe-haven demand, investors prefer physical gold,” the firm’s blog said.
The final positive catalyst for gold miners may be investor pressure for them to curb their cost overruns and be more efficient, BCA said, noting that six gold mining CEOs got fired in 2012.
“Such shakeups usually herald a major shift in corporate strategy, and gold equities could do well, even if gold prices go nowhere,” BCA said."
let's hope so. i have owned gold, in one form or another since around 2004. i have seen periods of stagnation in price of gold & gold equities, but this last 2 years has really been brutal and since about Sept 12 - - this last 5 months have been beyond brutal. even i am losing conviction despite the world absolutely not solving its problems. this is extremely disheartening period in time for gold investors. i hope it is a bottom, a significant bottom