Topic: Mining Stocks

Gold investing: Why it’s hard to find value in gold stocks

Gold moved up from $300 an ounce in the early part of this decade to over $1,000 in 2008. It fell to $700 in November 2008 as the stock market bottomed out. Like the stock market, gold has regained some of its losses and now trades at around $900.

We feel gold could eventually surpass its recent highs with a corresponding impact on many gold stocks. That’s mainly because investors fear that low interest rates and government stimulus spending will spur inflation. Gold prices, and gold investing, should continue to gain as the credit crisis makes it harder for gold companies to fund new projects and expand production.

Regardless of what happens with gold investing in general, speculative and promotional gold stocks will make significant gains from time to time on hopes of a gold discovery. You can say something like that about any sort of speculative or promotional stocks, but most investors who dabble in them still wind up losing money. That’s because it is much easier to launch penny gold stocks than to find a gold mine.


Mining stocks—the inside story

Mining stocks play a key role in your portfolio whether commodity prices are up or down. Pat McKeough tells you why in this special report—and gives you the outlook on gold, copper, uranium, and the remarkable story of Canadian diamonds.

Read this FREE report >>

 


We feel that the best way to profit from rising gold is through investing in gold stocks of companies with sound production, positive cash flow and strong prospects.

One such gold investing choice is Newmont Mining, symbol NEM on New York, a recommendation of our Wall Street Stock Forecaster newsletter. Newmont’s high-quality mines should last decades, and its costs are coming down. As well, most of its production is in politically stable areas, such as North America and Australia.

In contrast, some investors talk about the explosive returns that are possible in penny gold mining stocks. However, gold pennies suffer from all the usual penny-stock drawbacks. They trade on hopes and dreams, rather than realistic financial projections. Few if any will ever find a mineral deposit that can support a profitable mine. When that failing becomes obvious, or possibly long before, they will plunge to a fraction, possibly a tiny fraction, of current prices.

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