5 Imminent Catalysts for Gold Stocks, Part I
Please stay tuned for Part II by bookmarking my automatically updated author's feed.
In the meantime, here is my discussion of the first two of those five catalysts I've indentified as the most likely to bolster the near-term upside for gold mining stocks. Presented in no particular order, the first two relate to the anticipated strength of forthcoming earnings results, and the uninterrupted long-term upward trend in global gold investment demand (as opposed to far less consequential dynamics within the fast-money momentum traders).
Extra credit for anyone who can identify the remaining three catalysts. Even if they're not the same catalysts I've chosen, I bet they'd spawn some interesting conversation. Please understand, I won't be able to reveal my selections until Part II is released. :)
Thanks as always for reading, reccing (the article at the link if you please), and for sharing your Foolish thoughts on the topics discussed. Thank you, leohaas, for your kind comment beneath the article.
Like an epic stage production, this multi-year bull market for gold and silver is supported by an enormous cast of characters that each contribute meaningfully to the final masterpiece.
By "cast of characters," I refer to the extensive set of fundamental drivers and catalysts that come together -- in highly dynamic combinations -- to propel this long-term upward trend through successive periods of breathtaking market outperformance. They're far too numerous to discuss at once, so perhaps the best we can do is to hone our focus on the actors that are most illuminated under the spotlight at any given point in time.
Royal Gold's average realized gold price of $1,367 per ounce provides a yardstick for the sector's fourth-quarter revenue expectations, which can be applied to estimated operating costs for your favorite miners to yield a sneak peek at hurriedly expanding operating margins. For lower-cost producers like Eldorado Gold (NYSE: EGO) and my top pick, Gammon Gold (NYSE: GRS), operating margins will have surged to $950 or more for each ounce of gold produced in the fourth quarter, representing roughly two-thirds of operating revenue.
These momentary, manic maneuverings by momentum traders, however, reveal nothing about the longer-term upward trend in worldwide investment demand for gold. Amid the sudden liquidation in New York, traders in London and Hong Kong were reportedly "stunned" by the scale of buying activity from China in January. London's Financial Times quoted one banker observing: "The demand is unbelievable. The size of the orders is enormous." The Shanghai Gold Exchange reported that Chinese gold imports during the first 10 months of 2010 surged to more than five times the corresponding level from 2009! China is on the brink of overtaking India as the world's largest importer of gold, and convenient new investment programs like the Industrial and Commercial Bank of China's Gold Accumulation Plan open the vault doors to massive potential influx of retail demand for physical gold. With gold savings options going for as little as $1.53 per day, the GAP program presents a sea of change in gold's accessibility for the masses.