$10bn Xstrata bid good news for junior gold and silver stocks too
Posted on 07 August 2008 with no comments from readers
It is music to a precious metal investor’s ears to hear of a big bid in the sector. Xstrata is bidding $10 billion for rival Lonmin. The biggest and brightest are taking the opportunity of the summer lows to buy out rivals.
The bull market in precious metals is hardly over with many analysts seeing $1,200 an ounce for gold before the end of this year, and much higher in the following couple of years as the real cost of the current financial crisis weighs on the US dollar and global stocks and bonds.
Last summer at this time my favorite junior gold explorer’s shares were so bombed out I bought as many as I could with the money in my brokerage account. If only I had been bolder. The shares more than doubled within three months.
It will be the same this year, perhaps better. Xstrata knows that the summer doldrums is the best moment to buy precious metal stocks. But this is a logical move as in order to grow precious metal giants need to acquire their rivals. Organic growth is too slow to capitalize on the big surge in gold, silver and platinum prices.
Why not do the same thing as a private investor? The summer doldrums have shaken many junior gold stocks down to record lows by comparison to the metal price. They just have to be a good buy.
These companies are sat on the precious metal claims that just have to yield the reserves of the future. Eventually the Xstrata’s of this world will have to buy them, and long before that a consolidator is bound to make a fortune preparing for that day.
The great thing about buying precious metal stocks now – and all will benefit from the Xstrata bid – is that you have as near to a certainty as you are ever likely to find in investment. Inflation is in double digits in 50 out of 190 countries publishing statistics, and still rising thanks to easy monetary policy in the US.
As the economic crisis deepens in the US interest rates will be slashed from two to one per cent, as in the dot-com crash, and that will ensure higher inflation, and very, very much higher gold prices. Take heart and follow Xstrata.
no Comments posted by readers:
I’m afraid you’ve got it all wrong. It’s time time be long US dollar and equities and short commodities, oil gold the whole lot.
So all is well again and the US economy is fixed – hurrah! But what obvious complete nonsense…
I see gold is taking one hell of a bashing due to the strength of the $US. One wonders how long it can defy gravity.
I a certainly glad I am not on margin.
The US economy is not fixed but because of the cheap US dollar, the US is now better positioned than Europe is. Inflation is not good news for the emerging markets. Japan looks sluggish. So where does the smart money go?
This will definitely be the theme for the next 12-18 months. Oil will head back to $70 a barrel. Gold will correct markedly. And US equities will rally. Don’t miss the bull run.
G.A. , it’s easy to be fooled by the most recent move in market prices (projecting it into the distant future). You really need to look at the fundamentals, as they don’t seem to have changed in a similar manic-depressive fashion.
Don’t you think it is significant that oil and gold get taken down just before Russian tanks start to roll towards Georgian oil and gas fields?
Bet US vice prez is ballistic.
Remember the 9/11 shorting of airlines?
OTOH, you could say that the £, and the Euro are about to turn significantly down against the $, and the yen carry is unwinding.
Or Paris Hilton is standing for president.
Or the US military is playing war games in the jungle, ready for Venezuela.
Really, – anything will do!
What Machiavellian market manipulations in the face of tragic financial results.