Recent gold price declines are based on a false belief that the economy is improving, according to David Skarica, editor of The Gold Stock Adviser newsletter and author of "The Great Super Cycle."
“By the time we see the report on first-quarter growth … in April or May, people are going to realize that the economy has actually been decelerating – it has not really been recovering,” Skarica told Newsmax TV in an exclusive interview.
“That, of course, means they are going to print more money to try to juice the economy once again, and that’s going to be good for gold and precious-metals prices,” said Skarica, a member of the Moneynews Financial Brain Trust.
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Skarica said gold is in a long-term consolidation, moving sideways in a trading range. The price of the precious metal fell 5.1 percent in February, the fifth straight monthly decline, according to Bloomberg News. April gold closed Friday on the New York Comex at $1,572.30 an ounce.
“Gold is essentially just consolidating its gains from about August of 2011,” he said.
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“There seems to be these talking points recently where people were trying to act like the economy was getting better, we were seeing job growth. But the labor participation rate – the amount of people looking for work and are working – is near a 30-year low.”
Skarica said the bear market for gold mining stocks is a frustrating trend for investors, but that opportunities are emerging.
“The stocks that perform badly, some of it is their own fault,” he said. “A lot of the large companies started these megaprojects, and they’ve run over cost and the projects have taken longer than expected to go into production, and the market is justified beating them down to a certain degree.
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“Traditionally they trade at 30 to 40 times earnings, so we’re definitely getting to the point where these stocks are looking very appealing, even with the fundamental problems they have. They just have gotten too cheap and investors should definitely be looking at them here.”
Skarica mentioned Eldorado Gold as being “a perfect kind of takeover target for one of the large caps because they’d be able to add a whole bunch of new production, a whole bunch of cheap production at very compressed prices.”
Skarica said San Gold has been “really beaten up” and having terrible production numbers lately.
“That is the kind of company that one of the majors might say, or a larger company might say, these guys aren’t producing to their capability and we’ll come in and buy them cheap,” he said. “This was a $5 stock one time, it’s now 30 cents.”
About David Skarica
David Skarica is a member of the Moneynews Financial Brain Trust. Click Here to read more of his articles. He also writes the Gold Stock Adviser. Discover more by Clicking Here Now.
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