Your Questions About Invest In Gold Mines

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Paul asks…

Are The Saint Elias Mines Stocks A Good Stock To Invest Into?

Hi I was just wondering if anyone knew anything about the Saint Elias Gold Mines Stocks, and weather they are a good stock to invest into or not. Feel free to leave any insight you have on this company. I want to learn more about them.

Justin answers:

Here is your problem…..this is a non-producing POTENTIAL gold mine. It can take 10 years to go from moose pasture to a producing mine with the surveying and infrastructure requirements.

I personally don’t like gold mines (producing or not) that are not making money so I would avoid this stock because of that. Its chart is not terrible but the lack of a revenue stream makes it difficult to predicts its path….generally speaking gold mines shares follow (lagging behind) the price of gold and are evaluated on their production and reserves….you don’t know this for this mine yet…some drilling results but by the time this gold is produced the value of gold could be anywhere.

Penny golds CAN be not bad investments though. The reason is that if they are producers and have good reserves they become takeover target by the large mines….exploration and initial development is expensive and uncertain…the large mining companies prefer to simply buy-out smaller operations to expand their reserves.

Large mines don’t seem to make much money as far as capital gains go….look at the chart for Gold Corp [TSX:G]….for 1.5 years the stock has fluctuated between about $38 – $55. About a 50% gain(very approximate)

Avion Gold [TSX: AVR]…for the last 1.5 years the stock has gained from $0.42 to a high of $2.50 about a 500% gain

There are lots of penny gold stocks that have similar performances…BUT THEY ARE PRODUCERS THAT MAKE MONEY…it takes a while to find them but when you do the rewards are great…Gold stocks are full of scams so you must be careful.

I would stay away from St. Elias Mines just because it is not a producer at this time…its stock price is a function of hope and dream at this point…it could change sometime in the future, but that is how I see it now.

Joseph asks…

Where do you think the price of Gold will go over the next few months and why?

Do you think gold mine stocks are a good play right now?

Justin answers:

Ah, yes, the standard one sided answers. Xeno says gold has returned 1.8% per year since Napoleon and that stocks are the place to be. They use the argument that if you bought stocks in 1800 and something, you’d have done better off in stocks than gold. True, but how many people do you know that were living during the time of Napolean (or the mid 1800’s) are alive today?

That is the most juvenile argument I have ever heard. Why? For several reasons:

1) The average person only has a 30 year time frame to invest in.

2) Prior to 1971, measuring old against any other asset classes is irrevelent since prior to 1971, gold prices were fixed at $35/oz. While stocks were allow go grow, gold wasn’t.

But check this out, Xeno says that gold has only returned 1.8%. Do you know what the average annual return for the Real (inflation adjusted) Dow has been since 1924? A whopping 1.64% – big deal. The people who through out these figures are basing it on nominal (non-inflation adjusted) values not real values. That is idiotic. To not adjust for inflation is meaningless. I’ll give you an example, in the late 1960’s, if you were making $10,000 per year (in the D.C. Area where I live and can speak to) you were in fat city, I mean you were doing well. Today, if you’re making $70,000 a year, you’re living a modest lifestyle, nothing fancy. If you were to go back in time to 1965 and told somebody then that you make $70,000 a year, they’d think you’re fabulously wealthy, but they have not idea that in 2007, an average car costs $29,000 and an average home in the D.C. Area is $650,000. In the 1960’s the average car was about $2000 and the average home was about $25,000. So, you see, you have to adjust for inflation.

But, if you adjust for inflation, you get two radically different pictures. For example the Real Dow is somewhere in the high 10,000/low 11,000 range (a far cry from it’s 12,300 point nominal price). And adjusting gold for inflation, gold should be trading near $1,800/oz (way above it’s $660/oz current price).

Let’s look at another item. The argument that if you invested in the 1800’s in stocks. Yes, if you live to be 600 years old, then investing in stocks in the long run is better, but remember I said that the average person has about 30 years in their investment lifecycle? Well if you only have 30 years, then you need to go where the action is?

For example, from 1982 to 2000, equities were the place to be, but from 1966 to 1982, the stock market was in one of the worst bears markets in history. If you have invested in the market in 1929, it would have taken you 25 years to just break even. From 1980 to 2002 was not to have your money in gold, yet from 1971 to 1980 gold increased 2,329%.

But that’s history. Let’s look at today. If we look at the peak of the market when the equities bubble popped in 2000, the Nominal Dow topped at 11,722. If we take the bull from 2002 to today, the nominal Dow bottom at around 7200. So, if you look at 2002 to today (with the Dow currently at 12,370) we see a return of 72%. If we took the 2000 top to today at 12,370, we have a return of 5.5%. Now mind you, that’s just the Dow, the NASDAQ and S&P’s are still in negative territory as they have still not broken above their 2000 tops.

Now, let’s look at gold. In 2000, gold was trading around $280/oz. And bottom in 2002 at around $250/oz. Today, gold is trading around $660/oz. So, from 2000 to today, gold is up 135.7% and from 2002 to today, it’s up 164%. So let’s summarize:

Dow Gold

2000 – today +5.5% +135.7%
2002 – today +72% +164%

Okay, so which has been the winner and which has been the dog? Remember, from 1971 to 1980 when the stock market was being brutalized by a bear market, gold was up over 2,300%.

I love people like Xeno that spout of that kind of stuff. He’s what, probably in his late 20’s/30’s? His only experience has been with what’s been happening to gold during most of his lifetime and that’s been a very harsh gold bear market.

It’s funny hope people think. You talk to people today and they will tell you how wonderful the stock market is, yet if you talked to investors in the early 80’s, they were saying that equities were dead an a horrible place to be. In other words, they were going by the limited time from relative to their limited knowledge. People now are dogging gold, yet for a 9 year period, gold punished the equites markets. And remember, prior to 1971, gold prices were fixed, so you could not compare it to another asset class in terms of peformance prior to 1971.

Xeno probably read some excerpt from some talking head and took it as “law”.

Based on adjusting for inflation, the Dow is OVERVALUED by about 1200 points and gold is UNDERVALUED by about $1200.

And Xeno says it’s just a commodity now. Interesting. Then tell me Xeno, why are people around the world now starting to horde gold again? The position I’m in with my company allows me to speak with people from all over the world (very educated people may I add with Masters and PhD’s in areas of physics and finite elemental analysis). Gold is starting to be horded again as it seems that every one (except Americans) see an approaching financial storm looming and are stocking up on precious metals. Why else do you think gold is up over 160% in the last 4 years?

Where will gold be in the next few months? Hard to tell, but when it breaks about resistence at $670/oz. I would look for a rapid move to the upside. From 2001 to today, the HUI Gold Bug’s Index is up 732%. Now stop and think about that, if the Dow was up 732% since 2001, that would mean the Dow would be in the 80,000 point range. Where the heck Xeno gets the idea to be in equities over gold now, I have no idea.

Are gold stocks a good play? Yes, but not all. You need to do your research. During the 22 year secular gold bear market, gold stocks really got beaten down. I don’t trade in gold stocks (I like the physical commodity), so I can really advise you on the equities end, but the precious metals are about to explode like you’ve never seen before.

Richard asks…

Is it better to invest in gold ETF compared to conventional mutual funds?

Gold ETF always moves up and gives u profit, whereas mutual fund vary with market more. Should ETF be bought for long term or shor term? Do they get you tax benefit also?

Justin answers:

If you are sure the price of gold is going to go up buy a two times long fund.

If an investor feels the price of gold is going to rise he has a lot of choices here he can purchase fund symbols GDX, GLD or IAU. In this sector there are 2times long gold funds DGP and UGL and 2 times short funds DZZ and GLL.

I own GOLDX which is a mutual fund of mining stocks. I am just a little more conservative.

Daniel asks…

Should I buy a 1600 dollar macbook pro or gold and investments?

I really want my own mac after using my dad’s macbook .But I’m not sure if it is worth the money because I already have a laptop.I love macs ,but my conscience tells me that I should invest in gold like in the commercials.

For the record, I got more money in the bank. Also, I got a full tuition ROTC scholarship.
My current laptop is 6 years old ,and I watch Suze Orman .

Justin answers:

If you love macbooks you should just get the white one its only 1000 yea its older but its still fun i just bought mine and i love it

William asks…

Why does the value of gold continue to rise?

I am just curious as to why the value of gold continues to rise. Investors tell me that in the event of a future depression/recession to invest heavily in gold. Why? What good will gold do anyone if the sky is falling? Food, cotton, oil.. I understand. Gold?? My generation doesn’t even like gold. Can someone please explain this phenomenon to me? Thank you kindly.

Justin answers:

There’s no magic to paper money. It works as a medium of exchange and a store of value when and only when its quantity is strictly controlled. Reckless printing of money (which the US Fed is currently doing) would destroy its value and you would see a much devalued currency. That’s what’s nice about gold. Its quantity is controlled by nature herself. People have been trying to get around it for centuries. Alchemists labored long and hard to turn base metal into gold. None succeeded. The only way you can increase the supply of gold is by mining it – which is expensive and time consuming.

Another reason why Gold is popular is because unlike Oil, Cotton etc – it is easier to store the same value in Gold and it is universally accepted and still considered ‘money’.

To read more about this check out the article – http://demystifyinginvestments.blogspot.com/2011/09/what-does-rising-gold-prices-mean.html

David asks…

What’s a better and more secure way to invest in gold, Exchange Traded Funds or Futures?

Imagine another depression on the way.

Also, I’ll only have a few hundred dollars to invest.

Justin answers:

Dont buy gold itself…invest in the companys that mine it…you’ll do much better….trust me, and use a good online brokerage co. That has good beginner qualitys {like tutorials or easy to understand set up}, i use zecco, better then schwab, etrade, etc. They are the only ones with free stock trades, no minumums..

Http://friends.zecco.com/r/a7a2877caab8102b8555

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