Market indicators show an upward trend in gold production companies' stock prices. This article will review this current trend, and also evaluate why gold stocks and gold production company stocks make for attractive investment options.
Canadian stocks have experienced a recent boom, with Gold Production companies such as Goldcorp Inc., and Barrick Gold Corp. leading the way. While this has largely been attributed to gold prices having gained on a weak USD, there has been a noted increase in stock prices across various industries, including the prices of Oil Sands stocks and platinum mining stocks. There was, however, a slump for energy companies during this same time period; for example, PeetroBakken Energy Ltd experienced a 6.1% decrease in stock price after Raymond James Financial Inc. analysts lowered their ratings for the company’s stock. With such a steady increase in gold production stock prices, many savvy investors are considering moving their investments out of Money Market Funds and investing in gold instead.
In recent months, major gold production companies such as Barrick, Goldcorp, and Agnico-Eagle have all been falling behind in the gold market. However, recently posted profits have enabled certain gold stocks to catch up with others in the market. In particular Goldcorp- rated as the number two gold production company in the world based on market value- advanced 4.6% after doubling its dividend. Meanwhile, the world's largest gold production company, Barrick Gold, advanced 2.4% after this quarter’s earnings far exceeded estimates from financial analysts. During this same time-frame, Canadian gold production company Agnico-Eagle, the fifth largest in Canada, reported much improved production in one of its mines in Finland, resulting in a 6% increase, and taking the company stocks to a two-year high.
As the price of most commodities continues to rise, some investors feel uneasy that the bottom may drop out of the gold production market. Gold is still a very precious metal despite having few industrial uses. Nonetheless, gold production is not only at an all time high, but is also on the rise. There are discussions about gold possibly being used as an alternative monetary asset to strengthen the economic position of some countries. While there are no plans to introduce a gold standard, the precious metal is often used as a reference point to predict future currency fluctuations.
Gold is every bit as good as cash. In fact, it was announced that in November 2010, ICE Europe began accepting gold as collateral in the trade of crude oil and natural gas. Previously, only cash or government bonds were accepted as collateral, so the move essentially marks gold bullion as an equivalent to these other monetary markers. This trend is likely to continue with many other companies and clearing houses expected to follow ICE Europe's example in accepting gold as a currency.
In short, while some consider the current value of gold to be overpriced, there is plenty of evidence to suggest that investment in gold production is still a highly profitable decision in the long-run, especially as gold production stocks continue to rise in value.
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