CHICAGO, Aug. 26, 2011 /PRNewswire/ -- Today, Zacks Investment Ideas feature highlights Features: New Gold, Inc. (AMEX: NGD), Randgold Resources Ltd (Nasdaq: GOLD), Market Vectors Junior Gold Miners (NYSE: GDXJ) and Deutsche Bank AG Double Gold (NYSE: DGP).
Saddle Up for the Gold Bull
So let me get this straight.
A 7% pullback from an all-time high in the face of a 667% return over the last ten years means the rally is over?
I'm laughing so hard right now I'm having a hard time typing.
There's a few take away's here that everyone should pay close attention to.
People Hate Gold Because They Missed the Rally
The first is that people just love to hate the gold trade. And the simple reason for that is because they have missed the whole thing and it pains them to see prices screaming higher year after year while they sit on the sidelines and complain about the absurdity of bubblenomics.
Keep in mind, these are largely the same investors that have no problem piling into overvalued glamour stocks like Green Mountain Coffee, Open Table, Salesforce.com and LinkedIn. Ya, those are great companies, but you certainly don't see daily headlines chastising totally unsustainable, nose-bleed valuations in equities.
When the gold bears finally concede and jump in, then we have a top, because the pool of potential investors will finally be exhausted.
Gold is a Dollar Hedge
The second take away, and the most important, is the root cause of the rally, which is sustained weakness in the Dollar.
The US is so deeply in debt that the only way it will ever climb out of the financial abyss is to throw the printing press into hyper drive, or as the fancy ivy-league economists like to say, "monetize."
Gold is a Dollar trade, and unless the US can quickly find an alien society willing to fund its deficit, we'll be forced to print 'til we're green in the face.
So for those who still believe in the gold trade, and go ahead and put me at the top of that list, here is a list of gold stocks and ETF's to take advantage of the "historic" 7% pull back.
Top Gold Stocks and ETF's
New Gold, Inc. (AMEX: NGD) has seen big gains in 2011, currently up 26% as gold continues to trade in elevated territory. This Zacks #2 Rank stock has also seen strong estimate revisions, with the next-year estimate up 9% in the last month to 59 cents, a bullish 29% growth projection. With a market cap of $5.74 billion, NGD is a solid mid cap in a space crowded with small and large caps.
Randgold Resources Ltd (Nasdaq: GOLD) has also seen big gains in 2011, currently up 28% after recently spiking into a new 52-week high. Estimates are up for this Zacks #2 Rank stock as well, with the current year up 20% in the last two months while the next-year estimate has added 8.5%, a bullish 30% growth projection.
Junior gold miners are know to be volatile, so if you want diversified exposure to the group, you should definitely check out Market Vectors Junior Gold Miners (NYSE: GDXJ), a basket of 73 junior gold miners. Shares are currently down 14% on the year, so anyone looking to capitalize on the divergence pattern between physical gold and gold miners take note.
And finally, we have Deutsche Bank AG Double Gold (NYSE: DGP), which provides shareholders with twice the daily movement in spot gold prices. With a 49% return in 2011, DGP has strongly outperformed the market and its peers.
The Take Away
In spite of what you read in the headlines and hear from the "experts," gold is still very clearly in rally mode. So instead of panicking and selling into weakness, use the recent dip as a chance to finally get into one of the strongest trends of the last ten years.
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