Andy Cole's  Instablog

In my last article, I discussed the vast amount of upside that Gold has in the next few years. After further research, there is another gold-related sector that could experience some upside over the next few months: the gold miners.

Obviously there are many different companies in this space, so I’ve decided analyze two of the better looking ones within the industry. In no particular order, let’s start with Goldcorp.

Goldcorp recently just reported first quarter EPS of $.40 a share vs. analyst estimates of $.32 cents a share. The company earned $290.9 million in the quarter that ended on March 31st. This was up from $229.5 million, or 32 cents, in the year-before period.  Gold production for Goldcorp climbed 18.1 percent to 616,500 ounces and gold sold rose 17.4 percent to 607,900 ounces.

Chief Executive Chuck Jeannes stated in their conference call, “We remain confident in our existing production and cash costs guidance of approximately 2.3 million ounces of gold at a total cash cost of approximately $365 per ounce on a by-product basis and $400 per ounce on a co-product basis.”

From a cost outlook, this is good news for Goldcorp, as Gold prices continue to look bullish for the foreseeable future, and as long as they can keep this forecast, we should see a nice jump in revenue over the coming quarters. What’s more is that Goldcorp has forecasted output to rise to 3.5 million ounces in 2013. Looks bullish however you look at it.

It’s been quite a while since my last contribution to Seeking Alpha, but amidst the vast economic turmoil, there is yet another bubble is brewing. Here’s how you can profit from it.

In order to understand the fundamentals of this trade, we need only to review the headlines of the last few months:

Stimulus headlines-
• G-20 nations pledge 1 trillion in stimulus.
• The Troubled Asset Relief Program (TARP) worth $700 billion.
• American recovery and reinvestment stimulus package worth $787 billion.
• The Term Asset-Backed Securities Loan Facility (TALF) worth $800 billion.
• China stimulus worth $586 billion.
• Great Britain stimulus worth $30 billion.
• Japan economic stimulus worth $153 billion.

Unemployment headlines (est.)-
• United States at 8.5%
• Canada at 8%
• Great Britain at 6.5%
• Spain at 17.3%
• Italy at 7.5%
• Germany at 8.6%
• France at 8.3%
• China at 9%
• Australia 5.7%

I’m sure I have missed some points here, but hopefully you get the big picture. The fact of the matter is the world economy continues to slow at an alarming pace. As jobs are being lost, world governments are introducing new stimulus packages to help pick up the slack in consumer spending. This begs the question, however, where on earth is all of this money coming from? Given the fact that the IMF just boosted its global lost estimates to $4.1 trillion, surely we don’t actually have the money to actually pay for these bailouts and stimulus packages. And indeed, we don’t.

Let’s get it straight. The money that is being printed at present is being done so with no hard-asset backing whatsoever. The Treasury has clearly been putting the risk of inflation on the back burner with the goal of getting us out of our current deflationary spiral. As a result, we’ve seen trillions of dollars pumped into a faltering economy without any real signs of inflation.

That’s not to say that inflation isn’t over the horizon, because it definitely IS. When you print money at the rate that we’re printing it, you don’t create more purchasing power. Instead, goods and services will become MORE expensive as people need more currency to pay for them. At the same time, people are actually getting poorer as wages fall and jobs are lost.

Even bigger of a problem still is the fact that nearly every country in the civilized world is flooding their own economies with currency. Add to that the tight credit conditions, bank failures, and general fear within the world as a whole, and you have all the ingredients for a terrible economic climate.

So the question remains, where can investors put money during these dark times and still earn a decent return on investment? The answer is Gold.

 
(charts courtesy of thinkorswim)

The above chart is a 9-month chart of the GLD, an ETF that basically tracks the general movement of Gold. We’ve been bearish on the GLD ever since we hit a high of $98.99 in late February. However, the downtrend that had been in place since then was broken last Friday on decent volume. We also look to have set in a double bottom at $84.5, which was incidentally an area of strong support. This chart is definitely starting to look bullish again.

(charts courtesy of thinkorswim)