Seeking Alpha

Oppenheimer: Buy gold miners, not gold

  • Oppenheimer technical analyst Ari Wald sees big upside in gold miners going forward, and is more bullish on the miners than the metal itself.
  • Wald thinks the Market Vectors Gold Miners ETF (GDX +1.6%) can soar more than 40% from current levels to his price objective of $38; GDX has finally broken out from a long-term downtrend, he says, suggesting a new trend of outperformance is underway.
  • The analyst considers GDX a top trade idea, and believe the ETF has a stronger floor and offers more upside opportunity than the SPDR Gold Shares (GLD +0.4%).
  • Among individual GDX components, Wald recommends Goldcorp (GG +2.5%), Randgold Resources (GOLD +0.4%) and Royal Gold (RGLD +2%).
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Comments (17)
  • David at Imperial Beach
    , contributor
    Comments (4375) | Send Message
     
    I disagree. The major gold miners have already been bid up considerably, most especially including the gold royalty companies like (NASDAQ:RGLD). They probably can't go up much further without a substantial rise in the price of gold itself. (NYSEARCA:GDX) is already at a PE of 31. This is not bargain territory. Some of the major miners still are showing negative earnings at this price of gold. If you're going to be buying miners in preference to gold itself, then buy the juniors (NYSEARCA:GDXJ) or (NYSEARCA:JNUG) which have not been bid up so outrageously and still have a PE of 13.
    12 Aug 2014, 11:32 AM Reply Like
  • Stock Market Mike
    , contributor
    Comments (2537) | Send Message
     
    JNUG is 3x leveraged and suffers from decay. Just chart it next to GDX or GDXJ from the start of this year, and then decide. JNUG's highs are going lower and lower, while GDX is quite stable. Now chart it going back a full year - JNUG is significantly underwater.

     

    I don't see how you can recommend JNUG over conservative shares once the price has been bid up. If the shares drop 10%, JNUG will drop 40%.

     

    Can't go wrong with GoldCorp. They pay about a 2.5% dividend at my entry point. I'd rather have 2.5% from GG than from a US treasury. IMO stable/bull gold market is more likely than bear gold market.

     

    Heh... wonder if the funds finished building their positions? Now it's time to pound the table over how undervalued they are?

     

    -Mike
    12 Aug 2014, 11:54 AM Reply Like
  • Agent Graves
    , contributor
    Comments (147) | Send Message
     
    Someone has been making a very quiet play for Goldcorp since June 11, 2014.
    12 Aug 2014, 05:23 PM Reply Like
  • Brian Bobbitt
    , contributor
    Comments (2007) | Send Message
     
    I totally disagree with this article. I cannot see in any way, shape, manner nor form, (I guess that's the way you express high levels of disagreement) that GDX, GDXJ, Allied Nevada and so on will jump percentage-wise more than the actual physical metal, nor will any of them do it without the main driver [gold] rising.
    Unless they can give you 110% of what you are paying for, then I would not buy any gold or silver stock or paper.
    I have read [and written] hundreds of comments and articles regarding the PM's and I can tell you this, the mines don't rise unless the metals do first.
    PERIOD!
    Capt. Brian
    The Lost Navigator
    12 Aug 2014, 11:49 AM Reply Like
  • thomyoung
    , contributor
    Comments (28) | Send Message
     
    I agree but prefer GDXJ and GG is solid in my opinion. If you can't take a risk then don't get in the miners. I've owned them for years and yes there has been much bleeding the last two years or so, but if you can take a risk then the upside can be huge. Historically the miners have followed the price of gold and in the early 80s when interest rates were raised the precious metal did very good.
    12 Aug 2014, 12:02 PM Reply Like
  • robin steel
    , contributor
    Comments (100) | Send Message
     
    When the Oppenheimers and JP Morgans start pushing gold stocks, you can bet they are shorting them and selling into the "perception" of a rise in the PMs...a perception that they manufacture with managed "media".

     

    That doesn't mean that there won't be a new bull for PMs, as physical demand is strong, and it may eventually result in a Congressional demand for an audit of the US Treasury, which would be a big shot for gold...

     

    The fact that Rio Tinto is sitting on the biggest known reserve in "politically stable" Utah, could be a factor too...Inquiring minds want to know how the "Oilligarghs" will play it in the next 5 years...I wish Barrack had the cojones to get tough with them, and call their bluff...if they want to call him a "Socialist", why not be one and nationalize the resources that underlie the "Commons"? President Bernie would be a good start for US..
    12 Aug 2014, 12:47 PM Reply Like
  • pparaska
    , contributor
    Comments (191) | Send Message
     
    Wouldn't that be a fascist - taking over private property? The line is getting blurred though. Which "Bernie" are you insinuating for Pres?
    12 Aug 2014, 03:10 PM Reply Like
  • harball
    , contributor
    Comments (332) | Send Message
     
    Miners outperforming the underlying commodity is a bullish sign. People forget that one gets massive leverage relative to the underlying by buying mining stocks. If one beleives that a new bull cycle in PMs is underway, the smart thing to do is to buy the juniors and mid-tier names, e.g. AUY, NGC, EGO, AG, FSM, TAHO, etc.
    12 Aug 2014, 03:56 PM Reply Like
  • 6151621
    , contributor
    Comments (1180) | Send Message
     
    @harball, Yeah AUY is outperforming: I think today it past from loss to gain for the year but it's way behind gold or GDX. (AUY chart: http://bit.ly/1sUjUuV)
    13 Aug 2014, 03:53 AM Reply Like
  • Agent Graves
    , contributor
    Comments (147) | Send Message
     
    AUY is still lagging way behind the herd after they were shorted hard during the fight over Osisko.
    13 Aug 2014, 12:54 PM Reply Like
  • 6151621
    , contributor
    Comments (1180) | Send Message
     
    AUY recently pasted their pre Osisko offer price. I considered them a strong buy at 7 and AUY has done well since then but so have many others. Will they outperform? It wasn't the Osisko offer alone that hit AUY price, they also reported poor Q1 earnings as well. Agnico Eagle never sold off so hard because their Q1was really good!
    14 Aug 2014, 06:35 AM Reply Like
  • robin steel
    , contributor
    Comments (100) | Send Message
     
    Bernie Sanders, Independent (Socialist) from Vermont...If you listen to him every week with Thom Hartman, he's a good contrast to the Teaparty, they both hate the FED, for different reasons.

     

    Fascism is the term we use for the Nazi Party, which used the term "National Socialism" it was supposed to have been Corporate Government for the "People", but turned into an exclusive cult of hero worship under Hitler...lots of Americans supported him during the depression, and they tended to be "free market Capitalists", like the George Bushes of today...and the boards of directors of Rio Tinto and BHP. As the Snowdon revelations prove, there is an extreme element of Fascists working under the guise of fighting "terrorism", while they amass "meta data" for future use against democracy. Just exchange the word "Poor", for the word "Juden" and you have the same old Nazi template for a "new world order".
    What I propose is "Socialism" that makes the profit from the mining, energy, water, and waste cycles; all based upon natural resources found in "the commons"; work for "the people", rather than a small elite group of "robber barons"...We have a Constitution that is under constant attack from the Corporate State and the ultra wealthy who fight for their "right" to "own it all". The only way to counter the power of the oligarchs is to organize and demand that our legislators repeal "Citizens United", the "Patriot Act", and FISA Court rulings, but that is a long process and not nearly as much fun as "American Idol".
    In the meantime, Gold seems to be a good way to try to stay ahead of the "petro dollar war" that is raging behind the "War on Terror"...whose "assad" R U on, boy?
    13 Aug 2014, 10:47 AM Reply Like
  • james.
    , contributor
    Comments (892) | Send Message
     
    I agree with the Oppernhiemer Technical Ari Wald in the above article. In addition, I would add the following comments:

     

    Another reason that Gold increased in price today is the UN Report released today that the death toll in Ukraine has doubled to 2,083 in the recent two weeks due to indiscriminant shelling of the Donetsk residences. This barbaric behavior on the part of Kiev , along with Kiev's ludicrous insistance that the 280 heavy truck convoy speeding from Russian Federation towards Donestsk with Humanitanian Relief Supplies is simply a Trojan Horse Invasion Force, will lead to big trouble as soon as Ukraine Tanks roadblock the Russian Federation Trucks from entering into Donetsk proper. This will leave President Putin with no choice but to unleash his vastly superior 45,000 troops now along Ukraine's border, replete with Air Superiority Jet Fighter Bombers and Tactical Helicopters, to overwhelm the hopelessly overmatched Ukraine Army now laying seige to Donetsk after ruthlessly annihilating Luhansk resistance. Thus, Gold and Silver prices will then rocket to the upside, making new highs for 2014, while the DJIA makes new lows for 2014 down to 12,000 in 2 legs. Aug 13, 2014 at 12:17 pm PDT.
    13 Aug 2014, 03:17 PM Reply Like
  • Realist14
    , contributor
    Comment (1) | Send Message
     
    Why can't people learn that socialism is an all-around disaster? Elites are always dumber than free markets. Individual people spending their own money determines what gets produced. Be very wary of anyone claiming to speak for the people. They are thieves willing to kill unless they get their way. Nothing is less democratic than socialism. It's the ultimate conspiracy.
    13 Aug 2014, 04:51 PM Reply Like
  • pparaska
    , contributor
    Comments (191) | Send Message
     
    Bravo, Realist14, much agreement here.
    14 Aug 2014, 10:12 AM Reply Like
  • robin steel
    , contributor
    Comments (100) | Send Message
     
    Tell it to the Swedes, Dutch, and even the French...

     

    As for "speaking for the people", that's supposed to be what voting is for. If we let Debold count the votes, we don't have fair elections. Why not create a louder voice for the people by expanding voting via technology? A "Google vote" could allow more convenient voting hours, and provide satellite verification of every vote so that any computer nerd could count them...Hell, they already know how you vote, so allowing everyone to vote, would be more democratic...of course if you are a neocon, that's not in your game plan. I would like to see everyone vote, and would even make it a new tax credit for those that do. In Turkey, where things are in flux, it's mandatory to vote, but I don't see them derided as "Socialists", because of that requirement.
    As for the fear of "Socialism"; we already have it for corporations (think "bailout by the taxpayers" without their consent); and anyone on a government health plan (like those in Congress have given themselves)...I don't see any teaparty Congresspeople turning that down!
    What I said about the "commons", is that the earth belongs to people, and if people want to prosper on it for the short time that we have been around, we should (could) be careful about using the limited resources that we have, and it should be equitable at the subsistence level...when "property rights" are predominant over human needs, we have Capitalism run amok, with a lot of inefficiency and redundancy, designed to support an "executive class" that has pretty badly (except for itself, of course) handled the allocation of goods and services. "Political Economists" give all sorts of rationalizations for the "authoritative allocation of scarce resources", but it boils down to the old "Might makes Right" dictum that the US and the "five eyes" use to embroil "the people"
    into fearful submission. So, is that the ultimate "system"?
    I can't believe that we are unable to figure out something more responsive to the "will of the people", than "Caputism" (what we see in the new world order when Chinese billionaires and Wall ST billionaires get together in Shanghai, to talk about "excess population" over wine and dim sum)...don't you?

     

    15 Aug 2014, 03:20 PM Reply Like
  • pparaska
    , contributor
    Comments (191) | Send Message
     
    To me it doesn't matter if socialism "works" even in one country. It robs the human spirit. For that reason, and others, I abhor it. Stealing from citizens through taxation only to dole it out to those claiming need is wrong, in my opinion, and I'm entitled to that opinion.
    15 Aug 2014, 03:30 PM Reply Like
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