8 Companies That May See Declines If Gold Collapses

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 |  Includes: AUQ, AUY, GG, GLD, GSS, NEM, PAL, RBYCF
by: Hawkinvest

Gold prices are heading higher again, and just hit a record high of about $1,900. This is based on beliefs that gold is a "currency" and that more stimulus might be coming from the Federal Reserve in order to prop up a weak economy. The rise in gold is getting to parabolic levels and many investors might not realize the potential risks of a sudden collapse. Also, the stock prices of most gold companies are not seeming to indicate that the current gold price is sustainable or likely to rise much more, otherwise they would be much higher.

Plus, there is one great risk many gold investors may not be considering. Gold is likely becoming a target of many governments and central bankers who would probably like to see the price plunge, so that investors would send their money into assets that are productive for the economy. A nation full of gold hoarders will not lead to economic prosperity, but a nation that invests in stocks and real estate will. We have seen the Federal Reserve take action to drive and encourage investment in certain risk assets, so we cannot be surprised if new government policies are created to drive investors out of gold.

If you don't think a gold tax or other plan to break the price of gold is possible, just consider that European leaders have plans to tax financial transactions. Read more on that here. We all know governments need revenues, and a large gold tax could drive investors back into stocks and real estate by diminishing investor appetite for gold. This would solve two problems at once, new revenues for governments and a collapse in gold prices.

Of course, we could also see margin requirements raised and a coordinated effort by central banks to sell gold, and that would also cause a plunge in gold. I believe it is just a matter of time before we see a major gold correction and that something will spark it soon. Here are some gold stocks that would probably see big declines if a coordinated attempt to make gold less attractive was announced by governments and central banks:

Goldcorp (NYSE:GG) is a gold mining and exploration company, based in Canada. This company has operations in Canada, the United States, Mexico, and Central and South America and produces gold, silver, copper, lead, and zinc. This company is favorite gold stock for many investors and would likely see a large drop whenever gold plunges.

Here are some key points for GG:

  • Current share price: $54.14
  • The 52 week range is $39.04 to $56.20
  • Earnings estimates for 2011: $2.12 per share
  • Earnings estimates for 2012: $2.83 per share

Yamana Gold (NYSE:AUY) is a gold mining and exploration company, located in Canada. This company has gold exploration projects in

Brazil, Chile, Argentina, Mexico, and Colombia. This stock just hit a new 52 week high and could be ripe for a pull back.

Here are some key points for AUY:

  • Current share price: $16.09
  • The 52 week range is $9.78 to $16.18
  • Earnings estimates for 2011: 99 cents per share
  • Earnings estimates for 2012: $1.14 per share

Golden Star Resources, Ltd. (NYSEMKT:GSS) is a gold mining and exploration company, located in Colorado. This company has gold exploration projects in Ghana, Sierra Leone, Niger, and Brazil. This stock has been underperforming gold and would probably drop further if gold prices dipped.

Here are some key points for GSS:

  • Current share price: $2.40
  • The 52 week range is $2.14 to $6.01
  • Earnings estimates for 2011: 9 cents per share
  • Earnings estimates for 2012: 29 cents per share

Northgate Minerals, Ltd. (NXG) is a gold mining and exploration company, located in Canada. This company has gold exploration projects in Australia and Britain. The stock dropped to the $2.60 level recently and has rebounded sharply, so it could be smart to wait for pullbacks before buying.

Here are some key points for NXG:

  • Current share price: $3.24
  • The 52 week range is $2.41 to $3.54
  • Earnings estimates for 2011: 3 cents per share
  • Earnings estimates for 2012: 17 cents per share

Newmont Mining Corporation (NYSE:NEM) is a gold mining and exploration company, located in Colorado. This company has gold exploration and mining operations in United States, Australia, Peru, Indonesia, Ghana, Canada, New Zealand, and Mexico. This stock is another favorite of gold bugs and it is trading close to the 52 week high. A big drop in gold prices would likely impact this stock.

Here are some key points for NEM:

  • Current share price: $62.86
  • The 52 week range is $50.05 to $65.50
  • Earnings estimates for 2011: $4.65 per share
  • Earnings estimates for 2012: $4.98 per share

Rubicon Minerals Corporation (RBY) is a gold mining and exploration company, located in Canada. This company has gold exploration projects in Ontario, Canada, Alaska, and Nevada. The stock dropped to the $3.40 level recently and has rebounded, so it could be at risk of another drop.

Here are some key points for RBY:

  • Current share price: $3.99
  • The 52 week range is $3.17 to $6.34
  • Earnings estimates for 2011: Not available on Yahoo Finance
  • Earnings estimates for 2012: Not available on Yahoo Finance

North American Palladium Inc. (NYSEMKT:PAL) is a gold, and metals mining and exploration company, located in Colorado. This company has gold exploration projects in Canada. The stock has been weak even as gold prices have climbed so it could fare even worse if gold plunges.

Here are some key points for PAL:

  • Current share price: $3.81
  • The 52 week range is $2.97 to $7.99
  • Earnings estimates for 2011: a loss of 4 cents per share
  • Earnings estimates for 2012: 29 cents per share

SPDR Gold Shares (NYSEARCA:GLD) is an exchange traded fund (ETF) that tracks the price of gold bullion. This is trading at 52 week highs and way above key support levels. Gold appears very overbought and is ripe for at least a healthy correction if not a major collapse. Many gold bugs are trying to tell you gold is a currency but when is the last time you paid for your groceries, dentist bill or car with gold pieces. Also, if the financial system truly collapses, I would have real doubts that this ETF will be any more worthwhile than an empty promise.

Here are some key points for GLD:

  • Current share price: $184.59
  • The 52 week range is $118.71 to $184.82
  • Earnings estimates for 2011: Not applicable
  • Earnings estimates for 2012: Not applicable

Data is sourced from Yahoo Finance. No guarantees or representations are made. Hawkinvest is not a registered investment advisor and does not provide specific investment advice. The information is for informational purposes only. You should always consult a financial advisor.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.