Another year of sovereign debt uncertainty in Europe/US and dollar debasement has led to gold price soaring by 33% year-to-date to today, and the gold ETF (GLD) tonnage increasing to 1290.76 tonnes or about 41.5 million ounces (equivalent to 48% of gold produced in 2010). While gold price is surging, gold stock index (ETF: GDX) is sorely lacking behind. While GLD (orange line) has doubled since July 2, 2009, GDX (green line) has gone up by "only" 61%, as these gold stocks are inherently more correlated with general stock market performance and are also impacted by rising operating costs and country risk. If gold price stays at this kind of higher level, and the broader market stabilizes, gold stocks should do very well.
(Click to enlarge, source: Bloomberg)
I have updated my previous gold stock evaluation piece. Here I rank the gold stocks by Enterprise value/gold reserves from the highest (most expensive) to the lowest (least expensive).
Among the larger gold miners, my own value screen likes Gold Fields, Anglogold Ashanti, Barrick, Newmont (representing one-third of the GDX ETF). The emerging market gold miners (especially those in Russia and Central Asia) continue to trade very cheap e.g. Centerra Gold, High River Gold and Petropavlovsk. Execution ability of management is a prized object.
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