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This article will focus on Gold and the ETF, SPDR Gold Shares (NYSEARCA:GLD). I will not spend any time sharing my thoughts on Silver or its principal ETF, iShares Silver Trust (NYSEARCA:SLV). Typically gold and silver along with these two ETFs all move in sync. I am in the midst of pulling away from that theory and will likely treat them separately in the future. Another couple ETFs to consider are (GDW) and its junior partner (GDWJ). I use these latter two ETFs for my gold valuation analytics.

My recommendation for gold is to continue to hold cash in all precious metal securities.

We all know that investors in gold lean heavily on their position that gold, over time, works as an inflation hedge. This position or thought carries with it some meaningful time periods of argument.

Over the very long term, (see the below chart (1974 to date) this graphic shows two positive exponential gains and one very long declining period that convinces me that gold is not what you are lead believe by many authors. I suggest that any investment that goes up more than inflation can be considered an "inflation hedge." Obviously, as with any other asset, it matters greatly at what levels you buy it. Perhaps even more important is when you sell it. At the tail end of a giant bull market, gold as in any other over-inflated asset does not hedge inflation properly. Misconceptions of facts and data can be very expensive!

(click to enlarge)

Investors who bought gold in late 1979 or early 1980, spent 20 years absorbing losses. Not only didn't gold compensate for inflation, it compounded its negative effects on purchasing power and your portfolio had some meaningful hurt.

More recently, gold has been a disappointment to many investors while it has been mostly treading water. Gold is trading well beneath its all-time high of $1,924 an ounce on September 6th and well above its subsequent low near $1,520 which took place in late December. Most investors expected higher prices for gold this year. Since late January the price of gold has declined about seven percent. I advised clients last November to sell all precious metals and hold cash.

If you need some encouraging news, I suggest you stay tuned to my future articles on gold. I also reference another author below that you might want to follow. In all due respect there is very little good advice being published on gold, silver and precious metals. Analyzing the fundamental situation and staying close to the news is important, but the analysis would be incomplete without referring to long term technical charts.

Supply and Demand for Gold

As an economist I have many thoughts when I ponder gold as a commodity and as a currency. Understanding the chart belo answers a number of those thoughts. The current bull market for gold that has lasted about a decade and has quite possibly been sustained by the more recent increase in the production of gold. Beginning in 2007, mining companies reversed the downtrend and for over 3 years, gold production has been on the rise. Scarcity is a principle that says if the demand is greater than the supply prices will typically rise. This information and data is something to consider when thinking about where gold is heading in the coming months and years.

Current Valuation of 10 Mining Companies

My abbreviated valuation as presented in the below table for the mining companies gives a clear perspective of the future direction of gold. These ten companies represent 74.5% of the holding of (NYSEARCA:GDX). Click Here to see Morningstar's list of companies held by GDX.

My Valuation for GLD, SLV, GDX and GDXJ is the same as the mining companies average rating and opinion. That is currently bearish and does not support buying or holding these ETFs.

SymbolPriceProjected PriceRating: ( 0 - 100 ) / ( A - F )Fundamental Valuation & Technical Opinion
ABX

38

minus 24+%

69 / D

Not a good valuation and technically it is in a clear down trend .

GG

37

minus 21+%

70 / C

Not a good valuation and technically it is in a clear down trend . Leading technical indicators may be turning positive

NEM

46

minus 26+%

67 / D

Not a good valuation and technically it is in a clear down trend .

AU

33

minus 24+%

69 / D

Not a good valuation and technically it is in a clear down trend .

KGC

8.5

minus 21+%

70 / C

Not a good valuation and technically it is in a clear down trend .

GFI

12.8

minus 26+%

62 / D

Not a good valuation and technically it is in a clear down trend .

GOLD

82

minus 21+%

69 / D

Not a good valuation and technically it is in a clear down trend .

AUY

14.2

minus 16+%

74 / C

Not a good valuation and technically it is in a clear down trend . Leading technical indicators may be turning positive

EGO

13.2

minus 20+%

69 / D

Not a good valuation and technically it is in a clear down trend .

BVN

41

minus 22+%

68 / D

Not a good valuation and technically it is in a clear down trend .

Source of raw data: Yahoo Finance.

Notes for the above table: Projected Price is calculated and produces a probable range of the current price over the coming three to six months. Fundamental Valuation & Technical Opinion is calculated and translated into a Rating. Ratings below 90 / A are not current (never are) candidates for buying. I suggest cash and patience as an alternative.

Recommended Supporting Articles

Scott Wright is one of the only authors that I try to follow regarding my analytics for gold. I recommend you click on his name and see if you do not agree.

Summary

Only one mining company (NYSE:AUY) is trading in sync with its fundamentals. Only two mining companies are showing any technical promise. Not one mining company has a rating that stimulates my interest. The ETFs are followers of component mining companies and technically they look also look terrible. I suggest cash is the best alternative at this time for gold and most all precious metals.

Conclusion

I am currently a strong bear that has focused my recent postings in Instablog on securities that I believe should not be currently held in your portfolio. It is important to understand that holding cash can be a wise choice during time frames that are questionable or bearish. I have not included gold in my Instablog to date, but will do so in the near future.

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

Source: Gold: ETFs And 10 Miners Evaluated For Direction