With gold prices soaring well over $1,700 per ounce, it makes sense to start taking profits in gold-related stocks. It is likely that gold has hit at least a short-term top and it is now due for a correction. The past few weeks have been a near perfect storm to create a surge in gold prices, whether it is the recent headlines from the European debt crisis, the crisis created in Washington over the debt ceiling, plunging stocks, S&P debt downgrade, etc. Most of these headlines are likely to fade in the coming days and that could put pressure on gold and gold stocks. For the time being, it is likely that the gold trade is overcrowded and that is always a good time to sell into strength. Some of these stocks have had great runs and the others should probably be sold because they have been very weak even as gold surges. If a gold stock can't rally as gold surges, just imagine what might happen when gold eventually corrects.
Here are some of the names worth selling now:
Northgate Minerals (NXG) shares are trading at $3.18. NXG is a gold miner based in Vancouver, Canada. The 50-day moving average is about $2.92 and the 200-day moving average is about $2.88. Earnings estimates for NXG are 1 cent per share in 2011, and 21 cents for 2012. Northgate has invested heavily in its Young-Davidson mine, which is projected to achieve open pit production and the first gold pour in the 1st half of 2012. This stock is trading well above the moving averages and could be due for a pullback.
Yamana Gold (NYSE:AUY)
shares are trading at $14.14. Yamana is a gold mining company based in Toronto. The 50-day moving average is $12.46 and the 200-day moving average is $12.17. Earnings estimates for AUY are about 97 cents per share in 2011, and $1.12 for 2012. AUY pays a dividend of 18 cents per share, which is equivalent to a 1.4% yield. This stock has surged from about $11.25 in late June to over $14 today. It is trading well above the moving averages and is likely to correct with the price of gold soon.
Kinross Gold (NYSE:KGC)
shares are trading at $15.98. Kinross is a gold exploration and production company based in Toronto. The 50-day moving average is about $16.14 and the 200-day moving average is about $16.53. Earnings estimates for KGC are about 70 cents per share in 2011, and $1.01 for 2012. This stock has not performed well lately but could drop further on any weakness in gold.
Golden Star Resources (NYSEMKT:GSS)
shares are trading at $2.20. Golden Star is a gold mining and exploration company based in Colorado. The 50-day moving average is about $2.49 and the 200-day moving average is $3.42. Earnings estimates for GSS are at 5 cents per share in 2011, and 28 cents for 2012. GSS shares dropped to a new 52-week low recently even as gold is rising and that is not a strong sign. This stock will probably retest the lows when gold corrects.
Taseko Mines, Ltd. (NYSEMKT:TGB)
shares are trading at $3.50. Taseko is engaged in mining, exploration and production. This company is based in Vancouver. The 50- day moving average is about $4.59 and the 200-day moving average is $5.21. Earnings estimates for TGB are about 35 cents per share in 2011, and 54 cents in 2012. This stock has also been extremely weak in the face of a huge gold rally. TGB recently hit a new 52-week low and is likely to return to those lows when gold corrects.
The data is sourced from Yahoo Finance. The information and data is believed to be accurate, but no guarantees or representations are made.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
Disclaimer: Rougemont is not a registered investment advisor and does not provide specific investment advice. The information contained herein is for informational purposes.