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Future Gold Prices: What to Expect in 2013 and 2014
Pinnacle Digest writes: The markets continue to linger this summer as the prolonged correction in gold stocks deepens. As 2012 has been much of a write off for gold stocks, one has to ask what 2013 and 2014 may hold.
Roy-Byrne, in his most recent article, reminds readers that there are two drivers of stock prices: valuation and earnings. Valuations are driven by investor sentiment while earnings are driven by revenue and margins. Needless to say, both valuations and earnings have been beaten down considerably over the past year when it comes to gold stocks.
Valuations are currently at levels similar to those of late 2008 and late 2000. Those were the two best times to buy gold stocks in the past 12 years. In each period, the valuations increased substantially, by almost 100% from those levels within six months.
With that considered, it appears obvious a buying opportunity is upon us. Roy-Bryne also explains that there are 3 phases of a cyclical bull market. The stealth phase, wall of worry phase and participation or bubble phase. The gold market is still clearly climbing a wall of worry, but how close to the 'bubble phase' it sits, is anyone's guess.
At the end of the wall of worry phase, valuations are low and only the true believers remain. A sustained breakout to the next new high is the catalyst that shifts the bull market out of the wall of worry phase. This is the stage Roy-Byrne believes we will head into at some point in 2013. How an increase in valuations, margins and production will impact gold stocks is evaluated.
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