[Arado]

(11-26-2018 07:23 PM)The Wire Wrote:  

Does it make sense to look into Gold stocks like Barrick Gold?

A marketwatch article from early October said that Barrick is part of the BANG gold mining stocks. At the time, the article stated that the big tech stocks were over valued, and since then big tech has fallen while gold stocks have been mixed. Barrick is up significantly since that article was published.

Quote:

That brings us to our call of the day from The Felder Report’s Jesse Felder, who suggests going against the crowd with some cheap, anti-passive precious metals miners.

“It looks to me like they have been left for dead and, for this reason, present a terrific opportunity for true value investors, regardless of the bullish case for gold. And if the gold price takes off, today’s BANG share prices will certainly look like an unbelievable bargain in retrospect,” said Felder, in a blog post.

Felder says the so-called BANG (Barrick Gold ABX, +0.84% ABX, -0.75% Agnico Eagle AEM, -0.70% Newmont Mining NEM, +0.03% and Goldcorp GG, +1.49% G, +0.87% ) stocks are trading at their cheapest in decades. Meanwhile, the FANG highfliers (Facebook FB, -0.82% Amazon AMZN, -1.00% Netflix NFLX, -0.94% and Alphabet’s Google GOOGL, -0.85% ) are hitting their highest valuations in history, he notes.

He attributes this to the fact that big tech names dominate ETFs, while mining stocks are far less represented in those passive funds. That‘s laid out in his chart below (Note: Newmont Mining pops up, but in ETFs with hardly any assets, he says):

I'm pretty conflicted about gold, though. From what I know, as long as the Fed keeps tightening (both QT and rising rates), then gold shouldn't spike and should remain relatively calm - it may even go down a bit like it did in 2008 since investors may need to sell gold for liquidity to cover the inevitable stock market drop. Gold miners with significant debt could also suffer.

However, if the Fed starts up QE again and lowers interest rates, gold will probably skyrocket like it did in 2009-2011 when the Fed started QE and people were worried about hyperinflation. Gold will probably go up even beforehand if the Fed hints that it will loosen monetary policy in the near future. The trade war is also another factor - if we tariff 25% on all Chinese goods, could lead to significant inflation and tank the stock market at the same time, so investors will flee to safe havens like gold.

Curious to hear if anyone else has figured out a good strategy to deal with the inconsistent messaging on trade and Fed policy.