Gold just reached a six-month high and I suspect it will continue to rise. In fact, gold could pass its 2011 high. With the entire commodities market pulling into a bull market it only makes sense for gold to be leading the way.
Both gold and Gold Trust Shares (GLD) have been in a bear market until the third quarter 2012, but investors could see the bullish signs of gold when it based out in the beginning of August and went up by September 1st. Now, as the third quarter draws to a close, the 50-day moving average of Gold Trust Shares is about to move past the 200-day moving average. Along with the 50-day surpassing the 200-day moving average, the 12-period EMA has topped the 26-period EMA and is showing no signs of slowing down. Along with gold, copper has shown very similar bullish signs with the 50-day moving averages pushing upward toward a bull market.
A Third Round of Quantitative Easing (QE3)
Gold, copper, and silver stocks have propelled to life and given investors a reason to buy. Things only get better with the recent QE3 announcement. Quantitative easing will directly benefit gold as well as other commodities. The new money generated from the QE is best invested in emerging markets and commodities. This will lead to gold companies getting big loans and making bigger projects. So which are the best gold stocks to buy?
Freeport-McMoRan is down to about 40% of its 2011 high. Just like the entire gold market, the company based out and by early September began to make bullish moves. I suspect Freeport-McMoRan will grow as much as 70% when the 50-day moving average moves above the 200-day moving average.
Jefferies downgraded Alcoa (AA) and has expressed preference for Freeport-McMoRan demonstrating some of the benefits of the QE3. Along with this, operating activities are up and there was a vast improvement in accounts receivables from Q1 to Q2.
I like Freeport-McMoRan because it is an industry leader, drawing investments most likely from QE3, and an improvement of assets will lead to a substantial growth both as a short- and long-term investment.
Newmont Mining (NEM)
Newmont Mining is a stock that will continue to grow and pay good dividends with a yield of 2.4%. CEO Richard O' Brien said that if gold reaches $2000 per ounce the dividend yield will double to 5%. This is the kind of stock worth buying now and watching grow with the rest of the gold market.
Newmont Mining is cutting down its current liabilities quarter by quarter. This is another good sign that the company is prepared to increase profits. Overall, I like the company as a growth stock and as a value stock. One thing that I particularly like about Newmont Mining is its success in South America in Yanachoca, Peru. Higher gold production and lower mining costs has lead to a success in South America. But, priced at about $56 it might not be the best investment if you are strictly a value investor.
Market Vectors Gold Miners ETF (GDX)
Market Vectors Gold Miners is an ETF that I particularly like. The success of this ETF is related to the success of other major gold mining firms. About 15% of its assets are with Barrick Gold (ABX) and about 13% are with Goldcorp (GG). Other assets holders include Newmont Mining, and Yamana Gold (AUY). Although ETFs require extra taxes, they provide an excellent opportunity to invest in multiple companies at a lower price. This is a great growth investment.
If you are a value investor, Yamana Gold is the golden ticket. The company is a great buy for value investors currently selling at about $19 per share. It is very active mining gold, copper and silver in Brazil and Chile. Yamana Gold has also posted great growth in its dividend yield since 2010, posting 70% growth.
Along with the company's increasing dividend growth, its marginal growth in net income also deserves notice. Yamana Gold produced growth in net income from 2010-2011 despite increasing capital expenditures and investments.
Overall, the commodities market is showing great signs of bullish growth. If you are interested in mining metals such as gold, copper, and silver you have plenty of options. For example, if you are an investor interested in a firm that has already shown it can succeed your best bet may be Freeport-McMoRan or Newmont Mining. If you're interested in ETFs you should buy Market Vectors Gold Miners. But, if you are interested in value investing, buying Yamana Gold is worth the risk.