Finally, I particularly dislike the gold and mining stocks -- mostly because they've massively outperformed the metal itself so far this year. Even if the run-up in gold continues, I'm not going to bet on the continued strong run up in mining stocks. For example, Freeport McMoRan Copper & Gold (FCX) has rallied from a low of $16 dollars when it suddenly cut its dividend to trade Tuesday at $68.50 a share.
Now, Freeport was woefully underpriced in December 2008, as I pointed out then and recommended buying it. But now I think it's gotten far too far ahead of itself. In the gold trade, I'd much rather be long the physical metal than long the metal mining stocks, based on comparative value. That goes for Yamana Gold (AUY), Randgold Resources (GOLD), Newmont Mining (NEM) and most of the other mining stocks which have followed a similar pattern to Freeport.
For all these reasons, I'm waiting for a better value in gold to add to my positions, both with the metal and associated stocks. But let me be clear: I believe you need gold as part of your portfolio. I believe that gold will trade $2000. I believe in the inflation thesis and don't see how the federal government can raise interest rates in so delicate a way as to avoid at least some significant inflation.
But as with all trades, timing is everything -- and right now it's just too obvious to be a buyer of gold and gold stocks.That's why it has to be wrong. -- Written by Dan Dicker in New York
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