Last chance for gold


When I grew up in my corner of Florida, there was an old gas station on the edge of the Everglades. The owner did a lot of work with his huge, hand-painted warning sign:

Last chance for gas.

Behind the fuel pumps was a thin two-lane strip of asphalt and 90 miles of swampy wilderness. No smartphones. No “emergency call boxes”. And most places along the highway also have no fences.

You were on your own – like the economic desert that we are all forced to navigate today.

That’s why a sharp drop in gold prices and mining stocks is like this warning sign … and a monetary gift …

In short, if you waited on the sidelines after this year’s monster action, this is your second chance – and, in my opinion, the last chance – to buy gold at these prices. And it happens at the right time.

Typical moves for gold

Over the past 12 months, Gold has made a full trip in the mood of buyers: from being “the most hated commodity in the world” at a low of about $ 1,050 an ounce 12 months ago, to “need to buy” status in the summer of $ 1,350 an ounce.

If gold has now fallen from those high heights, the investor is more likely to ask, “Gold, what have you done for me lately?”

Overall, gold returned about 60% of the rally in 2017. However, such sharp declines, accompanied by a resumption of a broader trend, are a typical bullish market movement for this volatile metal. The most famous of these kickbacks was the run of gold to all-time highs in the 1970s.

Starting at $ 35 an ounce in the early ’70s, when gold became legal for Americans to once again own it, bullion prices rose to nearly $ 190 an ounce in 1975. That in itself. Over the next 18 months, gold prices fell nearly 60%, dropping to $ 100 before reaching a then-record $ 800 an ounce over the next three and a half years.

The song remains the same

Most importantly, when it comes to companies digging these things out of the ground … nothing has changed.

As I have noted in recent months, gold mining companies have done a great job of reducing costs and making money.

As early as February, we noted that the elite companies of this group were earning an average of $ 215 for every ounce of gold dug out of the ground, and, unsure, told everyone who would listen, “Stop selling panic gold reserves.”

Similarly, after dividend cuts in 2014 and 2015, when gold prices fell sharply, many of the same companies not only resumed payments but also began to raise them again. Meanwhile, mining firms have cleared most of the old cost structures. That’s why, for example, Newmont Mining was able to reduce its AISC – total support costs – from $ 1,170 in 2012 to $ 910 in 2016.

The fact is that there are many reasons to own gold: for speculative profits, as mentioned above; for insurance; and to preserve wealth. But you can’t benefit from any of these strategies without taking advantage of a gift that consists of low gold prices and low expectations placed on our table by hair street vendors.