GOLD 0.51% $1,391.7 gold futures

gold stock buying strategy, page-2

  1. 3,800 Posts.
    My own view is that established gold producers are now fully valued with respect to the current gold price. Investing in these stocks is primarily a leveraged investment into future price moves of gold. At the moment there is actually a risk these stocks are overvalued as the $A gold price has been held back by the rising $A currency, hence the increased gold price will not actually correlate to increased mine profits. While the gold price is rising, investing in established producers is a "low risk" strategy, however with any correction in the gold price we will still see some falls, if not temporarily, in these stocks.

    There are a number of areas where pricing distortions occur that can be targeted to seek higher returns.

    1. Companies developing new mines - these stocks generally trade at a discount due to risks associated with commissioning new mines. However as construction and commissioning is completed and gold recovery and orebody reconciliations are confirmed the discount is eroded until the stock is trades in line with the established producers. Therefore an investment strategy is to invest in stocks with defined reserves, approved finance and are into mine development some 6 to 12 months in advance of construction. Stocks in this category would be OXR, DOM, GTM, HER, DIO

    A second tier in this category would be stocks who are curently conducting feasibilities and are seeking approvals on advanced projects where reserves are already established. Stocks in this category are DRA, BSG, RBK (already part producer).

    2. Gold Exploration Stocks
    There are numerous strategies to employ to seek profits with exlporation stocks. Quite often good price moves occur in advance of drilling of high profile targets. The "buy and hold" can sometimes produce big profits but is also very high risk. Jumping on board after an initial early exploration success can be worthwhile. This end of town is best for the experienced trader whom is able to take way the emotion of the trade and not get caught up in the hype of the "potential" of the project and is able to exit mechanically according to a pre-determined strategy.

    my views only. I hold DIO and OXR.


watchlist Created with Sketch. Add GOLD (COMEX) to my watchlist
arrow-down-2 Created with Sketch. arrow-down-2 Created with Sketch.