It's like a force of nature when the conditions are just right. A perfect storm.
WASHINGTON (PRWEB) March 17, 2008
That's why Barrick Gold (NYSE:ABX) is the "Top Stock Pick" of the growth stocks guru, who sees "huge moves" in unhedged gold mining stocks as gold prices soar.
"Given the state of the US dollar and a basic understanding of supply and demand dynamics, I think we'll see gold prices hit the $3,000 an ounce mark before it's all said and done," says Wyatt.
"Hitting $1,000 an ounce as gold did last week may have seemed impossible back when gold was hitting $500 an ounce. But I've been expecting this move for gold. I've been recommending unhedged gold mining stocks," he adds.
Wyatt says the forces behind gold prices' dramatic move higher are feeding off one another. He says, "It's like a force of nature when the conditions are just right. A perfect storm."
Wyatt believes the storm began when former Fed Chairman Alan Greenspan cut interest rates too low and left them there too long.
He says, "The US economy was still working its way out of the stock market collapse. That was a time when, economically speaking, we had to take our medicine. But the Fed couldn't wait. The liquidity pumps were turned on in the form of low rates. And they were left on way too long.
"The result was a massive depreciation of the US dollar and the housing bubble. Anytime you debase your currency, the value of hard assets like gold, and really, commodities in general, is going to rise.
"Now once again, we have a Fed Chairman who can't wait for economic realities to sort themselves. Sometimes, a company or two needs to go belly up. Instead, the liquidity pumps have been turned back on. That's going to continue to weigh on the dollar. And it's going to keep gold prices moving higher.
"We've also got global supply constraints to consider. I would be remiss if I didn't mention the situation in South Africa, where gold production just fell 17% due to limited power supplies. It's going to take a long time to build up the infrastructure there to support the higher production level the world demands."
Not many on Wall Street are willing to put a price target on gold, but that doesn't bother Wyatt. "I can easily see gold prices hitting $3,000 an ounce. Gold prices hit their last all-time high in 1980. That was $850 an ounce. Adjust for inflation, and you get $2,177. So as far as I'm concerned, gold's only half way to its highs. And as any trader will tell you, things don't get really interesting until an asset breaks through its former highs. That's when panic sets in," he says.
Again, Wyatt's not bothered by the thought of panic-buying of gold and selling of dollars.
"We'll be ready. I've been recommending unhedged gold mining stocks recently to my Top Stock Insights subscribers. Being unhedged simply means that company hasn't sold any of its production forward - the company is prepared to take what the market will pay as it pulls gold out of the ground. The unhedged miners, and the investors who own their stock, are the ones who are really going to cash in," adds the growth stocks guru.
He says, "Of course, every investor should own some of the granddaddy of them all: Barrick Gold (NYSE:ABX). After all, it's sitting on the biggest reserves of gold in the world. But it's the smaller miners that will you give you more bang for your buck."
He adds, "I've had Richmont Mines (AMEX:RIC) on my buy list. And I've just published a special report for my Top Stock Insights subscribers, Gold Rush 2008: 6 Gold Stocks for a Down Market, featuring 5 other gold mining stocks that are doing great right now but will make some absolutely huge moves as gold moves toward $3000 an ounce."
For more on Ian Wyatt's opinion on gold, plus information on Gold Rush 2008: 6 Gold Stocks for a Down Market, visit TopStockInsights.com at the following url:
About Top Stock Insights
Top Stock Insights is an investment newsletter led by editor and chief investment strategist Ian Wyatt and his research team in Washington DC. Top Stock Insights provides its members with consistently reliable mid-cap and large-cap growth stock picks, uncovering companies with proven financial results, a competitive advantage, market growth drivers, and an attractive valuation.