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The Best Way To Understand Gold Investing

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					The Best Way To Understand
      Gold Investing
I don't generally watch the major gold
 stocks.
 stocks In addition to everything
 troubling the juniors, majors actually
 have to run mines. Once a mine is in
 operation, the blue sky vanishes, and the
 stock's price becomes largely a function
   f                         f
 of costs versus the price of gold.
And with rare exceptions mines are very
 finite            it's just      ti
 fi it resources; it' j t a question of f
 time before the ore plays out, leaving
 you with little but an environmental
 liability.
As you know, I think new production of
                                    price,
 gold is trivial in determining its price
 compared to what the owners of the four
 billion ounces now above ground decide
                             g
 to do.
                               y      g
But, for what it's worth, very few gold
 mines are now making money (especially
 after allowing for amortization of capital),
    d             b i   f    dt l
 and many are being forced to close down d
 because even their cash costs exceed
                            margin.
 their revenue by a wide margin
Mines close (even temporarily) only as a
              desperation,
 final act of desperation because interest
 costs and substantial maintenance
 expenses continue whether they're
    p                           y
 producing or not.

In addition, laying off labor is not only
 expensive, but risky—experienced
 workers may not be available when you
 need them back.
When real interest rates are negative,
                              poorly
 bond prices tend to perform poorly. This
 was the case in the 1970s.

However, when real interest rates are
 very high, such as was the case after
 1980, government bond prices tend to
 rally.
So why is gold a good investment? And
 how are higher gold prices benefiting
 mining companies?

The big news among name gold mining
 companies like Newmont and Barrick is
 uniformly positive. However, these are
 rotten businesses—but excellent calls on
 gold, if we can pick the bottom for the
 stocks.
Right now it still might amount to
                    safe
 catching a falling safe. I like trying to
 pick bottoms, if only as an academic
 exercise; it's mainly a question of
         ;           y q
 determining the moment of maximum
 pessimism.
And this is probably it. Often you're
 better off waiting until an uptrend
     fi    that         i f t      b tt
 confirms th t it was, in fact, a bottom.
Of course, what looks like the start of an
 uptrend may be nothing more than a
 "dead cat bounce." It's impossible to
 have certainty in this business, and the
              y                 ,
 more I know about anything, the less
 certain I become.
When you hear some advisor claiming he
 will always get you in at the bottom and
    t t the t    d 't be     i        ht
 out at th top, don't b naive enough to
 pay attention.
Still, things are so gloomy both for the
                            it s
 metal and its miners that it's worth
 paying attention to some troubled
 j        ,         y         g
 juniors, with an eye to using them as
 leveraged calls on gold.

Read more about charles nenner stock
 picks and jim chanos stock picks here:

    p           g
http://fundmanagernews.com/

				
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Description: I don't generally watch the major gold stocks. In addition to everything troubling the juniors, majors actually have to run mines. Once a mine is in operation, the blue sky vanishes, and the stock's price becomes largely a function of costs versus the price of gold.