Gold Investing in 2010
This Year's Gold Market Outlook
Editor's Note: For updated information on the topic, be sure to check out our resource page on investing in gold.
The rising price of gold is sending you a message.
Are you listening?
You should be. Because it's screaming, "BUY!"
Gold Market Outlook for 2010
I've been bullish on gold for over ten years. But I've never been as bullish as I am right now.
Gold prices are still dirt-cheap compared to where I believe they will be in just a year from today.
World gold production is falling. Rising production costs, infrastructure failures, and tightening regulatory issues have forced global output to drop over 8% since 2000. Meanwhile, world gold reserves are being exhausted faster than new reserves are being discovered.
At the same time, investment demand for gold is skyrocketing — up 150% in just two years — due to concerns over the U.S. dollar. The value of the dollar has dropped over 15% in the past nine months and is quickly approaching a 10-year low.
But it doesn't end there...
Central banks around the world have now become net buyers of gold for the first time in nearly 30 years. This is a dynamic shift in thinking on the part of the people who hold most of the world's money. Central banks are snapping up the world's gold because they recognize the need to hedge against the coming dollar devaluation.
In addition, hedged players in the mining market have suddenly begun covering their short positions. This indicates they fully expect higher gold prices.
Many of these companies, such as Barrick Gold (NYSE: ABX), have been shorting gold for almost two decades. But now the majors have recently covered a total of over $3 billion in hedged positions.
These kinds of developments are extremely bullish for gold!
But they're even more bullish for...
Junior Gold Stocks
The fact is the major gold companies just don't have as much talent as the juniors in making discoveries.
That's because talented mine finders want to work for themselves instead of for the majors. It's also because they stand to make a lot more money out on their own.
A top geologist with a major that makes a big discovery might get a sizable bonus and a new credenza in their office. Meanwhile, a junior mining executive who makes a big discovery could make tens of millions of dollars — or more.
So the major gold mining companies are in desperate need of acquiring new deposits. And I expect that we will see many more announcements over the next few months of majors buying out junior gold companies with big discoveries.
The investment upside for junior gold stocks has literally never been better. I recommend looking for underpriced junior gold stocks with good management, tight share structure, and large resource base in geopolitically safe regions, such as Idaho's Boise Basin or Canada's Abitibi Greenstone Belt. (The Boise Basin, in fact, is one of the most overlooked gold-bearing regions in the world.)
I fully expect gold to break the $1,500 level within the next 12 months. That means 2010 will a breakout year for junior gold stocks beyond anything we have experienced in the last 10 years.
We still have a long way to go before the junior gold stock markets reach their peak. I urge you to begin establishing positions now.
The price of gold is sending you a message.
Are you listening?
Editor, Wealth Daily
Investment Director, Mining Speculator and Greg McCoach's Insider Alert
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