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I believe that the masses are stumbling over themselves to buy gold when the far better value is to own the companies that control so much of the supply. I will probably be pilloried for this by the gold bugs, but I’m going to hold my ground: now is not the time to buy gold and it may be a great time to sell it. Words: 435
So says Brett Korsgaard in edited excerpts from an article* which Lorimer Wilson, editor of munKNEE.com (It’s all about Money!), has further edited ([ ]), abridged (…) and reformatted below for the sake of clarity and brevity to ensure a fast and easy read. Please note that this paragraph must be included in any article re-posting to avoid copyright infringement. Korsgaard goes on to say:
As Warren Buffett stated in 2010 when gold could be had for less:
You could take all the gold that’s ever been mined, and it would fill a cube 67 feet in each direction. For what that’s worth at current gold prices, you could buy all — not some — all of the farmland in the United States. Plus, you could buy 10 Exxon Mobils (XOM), plus have $1 trillion of walking-around money. Or you could have a big cube of metal. Which would you take? Which is going to produce more value?
While owning gold outright (or the derivative that controls it) does not have the company risk of a Goldcorp or Barrick and the like, these companies hedge against this fact by having proven reserves of the yellow stuff in the ground extractable at average prices of about $500.00 an ounce [see table below]. That is a store of value in the truest sense of the word.
| Company | Share Price | Market Cap | Cost to Produce (per ounce) | Reserves (ounces) |
|---|---|---|---|---|
| Barrick Gold (ABX) | $49.00 | $49 Billion | $457.00 | 138 Million |
| Goldcorp (GG) | $50.00 | $40 Billion | $443.00 | 60 Million |
| Newcrest Mining (NCMGF.PK) | $40.00 | $31 Billion | $493.00 | 205 Million |
| Newmont Mining (NEM) | $58.00 | $28 Billion | $485.00 | 142 Million |
| Kinross Gold (KGC) | $15.00 | $17 Billion | $508.00 | 92 Million |
| AngloGold Ashanti (AU) | $45.00 | $17 Billion | $638.00 | 264 Million |
| Yamana Gold (AUY) | $15.00 | $11 Billion | $442.00 | 19 Million |
I just can’t say it any better than that. The time to buy gold is over. If you still want exposure to gold, the time to sell gold and buy the producers is now.
*http://seekingalpha.com/article/286995-time-to-sell-gold-buy-the-producers-if-you-must
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Editor’s Note:
- Permission to reprint in whole or in part is gladly granted, provided full credit is given as per paragraph 2 above.