I'm not convinced the gold price will rescue the sector. The USA dollar value often negatively correlates with the gold price, at least on the historic charts.
The USA economy is growing, the USA dollar is appreciating, and the Fed are raising rates in the USA - all pointing to a lower gold price.
I do think gold will get a small bounce in the near term, and that may be a selling opportunity.
Currently at $1,210 USD, it may bounce to about $1,270 in the short term, before dipping to below $1,200 for an extended period, and possibly years as (some) Western economies rebound.
The only place to invest in gold, in these scenarios, is in economies with a falling local dollar, like the Aussie AUD, because the fall in value mitigates the weakening global gold price, but you need to be selective with what you invest in, and (probably) mostly in producers, or very near term producers with good metrics for profit based on a short repayment of loans, like EAR.
I've taken a punt on a couple of explorers, and will sell into any short term spike.
Of course, I am only reading the USA economic strength, and the USD strength, and the correlation with historical gold charts and indexes, and things sometimes don't follow historical patterns, but then again...
There are some gold stocks in Australia making money, but almost none in North America (with good reason, if you follow the American economic rebound and statistics).
I wish I could be more optimistic on the global gold price in the medium term, but you just need to be objective as possible and believe the data, removing all emotion where possible. This is difficult for me because I love gold more than any other investment thesis.
These are only my current views, and of course, economies reverse, and international events can intervene, but I believe USA inflation is under control, and interest rates are rising, company profits are very good, and property values are increasing, and the days of easy money and bail outs and money printing by the Fed are finished - all of this is negative for gold.
DYOR please, because I wish the current data was different for gold speculators (particularly in the USA), but it is what it is.
As for EAR, well... if all holds true, it should be a good project from year 2 onwards. Only one year to pay the loan required to refurbish and commence production, and then there should be 3 years of profits, even with a lowering gold price, which makes this project one of the attractive ones. What will those profits be? Who knows, but possibly within the broad range of $15m to $30m a year - if all goes to plan.
Interestingly, I'm expecting one or more substantial holder notices soon, possibly ceasing, judging by the way the stock price has been evolving.
Gw
EAR Price at posting:
18.0¢ Sentiment: Hold Disclosure: Held
