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Gold Producers: Why they are Set to Explode
Pinnacle Digest writes: Gold stocks have been destroyed in the past 18 months. Although the price of gold has held in relatively well, stocks which mine and explore for the metal have paled in comparison. Since January 1, 2011, GDX is down 28%, while gold is up 10%. Jeff Clark and the folks at Casey Research, along with our team at Pinnacle, believe strongly that the contrarian opportunity of a lifetime has presented itself in the form of gold equities. Clark argues that the investors with enough money to buy, courage to act and patience to hold, will be rewarded handsomely.
Time and again gold stocks have outperformed the yellow metal for very specific reasons. Gold stocks have leverage to gold. An example of this can be seen from January 2001 to January 2008 when gold stocks surged 950%, even more than the precious metal itself. Clark also reminds us that from 1970 to January 1980, gold stocks rose 700+%, including 289.5% in the last thirteen months of that period. It is also important to consider that at this point, gold is universally under-owned and there is a record amount of cash on the sidelines.
Remember that relative to gold, equities have not been this cheap since the selloff of 2008. Clark uses a perfect example to sum up just how undervalued gold stocks truly are. A $1,000 investment right now would buy you roughly 0.6 ounces of gold. A $1,000 investment could buy you as many as four ounces of gold by buying shares of Goldcorp or more than five ounces by buying shares in Eldorado Gold. This is the amazing leverage that many gold stocks are offering investors. This disconnect will work in the miners favor as the rush to gold and gold stocks is reignited.
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