Topic: Mining Stocks

Gold stocks: The best way to profit from rising gold

Gold closed at an all-time high of $1,475.00 U.S. in Friday’s trading. It now trades at around $1,468, up 27.4% from a year ago.

Gold’s recent gains have partly resulted from investor fears about the sovereign debt of European countries after Portugal requested a bailout from the European Union and International Monetary Fund. Investors are also worried about political turmoil in Libya and other Middle Eastern countries, as well as the possibility that today’s artificially low interest rates and governments injecting money into their economies will spur a huge rise in inflation.

These fears are prompting more investors to buy gold and gold investments, because they believe investing in gold will provide them with additional security.

(You can get our latest views on the outlook for gold, as well as our latest advice on lower-risk gold investing strategies, in our free special report, Gold Investing: 7 Profitable Strategies for Investing in Canadian Gold Stocks. Click here to download your copy now.)

Stick with gold stocks for higher gold investing profits

We continue to feel that the best way to profit from rising gold is by investing in gold stocks, particularly companies with rising production and strong prospects. Even so, because of their volatile nature, we continue to recommend that gold stocks only make up a limited portion of your portfolio’s resources segment.

In the Thursday, April 7, 2011 Stock Pickers Digest Email/Telephone Hotline, we updated our buy/sell/hold advice on New Gold (symbol NGD on Toronto). The gold stock’s share price has risen over 114% for us in the past year. That’s more than four times the rise in the price of gold.

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Gold stocks: New Gold is focused on raising its production

New Gold has three operating mines: the Mesquite mine in the U.S., the Cerro San Pedro mine in Mexico and the Peak mine in Australia. It also owns 30% of the El Morro copper/gold project in Chile (Goldcorp owns the other 70%) and 100% of the New Afton gold/copper/silver project in B.C.

El Morro contains an estimated 4.7 million ounces of gold and 3.7 billion pounds of copper. New Afton holds an estimated 2.5 billion pounds of copper, 2.7 million ounces of gold and 8.3 million ounces of silver.

New Gold expects to produce a total of 380,000 to 400,000 ounces of gold this year. The New Afton mine should add over 85,000 ounces of gold and 75 million pounds of copper a year to the gold stock’s production after its planned start-up in mid-2012.

The company also recently agreed to buy Richfield Ventures (symbol RVC on Toronto). Richfield owns the Blackwater gold project in central B.C., about 450 kilometres north of New Afton. Blackwater holds as much as 3.8 million ounces of gold. After it brings New Afton into production, New Gold aims to use the same mine-building personnel to construct a mine at Blackwater.

In the Hotline, we looked at how New Gold will pay the $550-million purchase price for Richfield, and whether this acquisition is a good move for the company.

Our Hotlines bring you our up-to-date recommendations on New Gold and other fast-moving aggressive picks 50 — or more — times a year

As I mentioned, in the the April 7, 2011, Stock Pickers Digest Email/telephone Hotline (which you can immediately view when you take a one-month free trial to Stock Pickers Digest), we’ve taken a close look at New Gold’s purchase of Richfield, and updated our advice on the stock, based on the company’s current financial position and our short- and long-term outlook for gold prices. We’ve concluded our analysis with clear advice on whether you should buy, hold — or sell — this intriguing investment.

(Note: If you are a current Stock Pickers Digest subscriber, please click here to view Pat’s recommendation. Be sure to log in first.)

Our Hotlines are one of the many benefits you get when you subscribe to our newsletters, including Stock Pickers Digest. We send out new Hotline messages to our subscribers 50 times a year (or more if circumstances warrant).

If you buy aggressive stocks, you really should have a subscription to Stock Pickers Digest. The latest issue gives you our full analysis, including clear buy/sell/hold advice, on New Gold and 19 stocks that may be suitable for the part of your portfolio you devote to aggressive investing. What’s more, you can get this issue free. Click here to learn how.


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