Gold mid-tiers’ Q3 2024 fundamentals
All-time-high gold prices combined with relatively-contained costs catapulted unit earnings to another epic record.
While the Federal Reserve has cut back on its money printing program, the fact of the matter is that the “official” U.S. national debt is closing in on $18.0 trillion. The unofficial national debt (when obligations like Social Security, Medicare, Medicaid, welfare, and now Obamacare are taken into consideration) is closer to $200 trillion.
The Japanese national debt just hit one quadrillion yuan.
Many countries in the eurozone are drowning under debt. The European Central Bank recently started talking about printing money to finally get the eurozone out of its mess.
All of this is very well-known to Profit Confidential readers.
Why do I bring this up again today? I’m back focusing on debt because it is becoming more and more apparent that the only way to reduce the record national debt many industrialized countries have accumulated since the Credit Crisis of 2008 is to print even more money.
And the collapse in the volatility of gold bullion prices could be pointing to just that. To see what I’m talking about, take a look at this chart:
In April of 2013, when the sharp decline in gold bullion prices began, volatility for gold prices was very high. Since then, the volatility index for gold, an index that essentially gauges investors’ fear factor for gold bullion prices, has collapsed.
And when we look at the price chart of gold bullion (see next chart below), we see strong support for the metal just below the $1,200-an-ounce level. This level has been tested twice and on both occasions, gold failed to fall below $1,200. In technical analysis, this is referred to as a “double bottom.”
So far this year, while we’ve heard a lot about the stock market making new highs, the reality is that the Dow Jones Industrial Average is flat for 2014, while gold bullion prices are up 5.6% for the year.
Obviously, as gold bullion prices continue their rebound, albeit slowly, those companies exploring for and mining the yellow metal will see their stock prices rise. While gold bullion is up just less than six percent so far in 2014, several of the gold mining companies we follow are up 50% for the year.
If I had to pick the most undervalued sector of the market right now, it would have to be the shares of quality senior gold producers.
by Michael Lombardi, MBA
