This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
See Cramer's multi-million dollar portfolio for FREE and get his new book Get Rich Carefully! Learn More

Gold to Rally Through 2012, S&P Says

BOSTON (TheStreet) -- Standard & Poor's is recommending gold and gold miners as top investment picks only days after downgrading U.S. Treasuries, which sparked a firestorm in financial markets worldwide that boosted the price of the precious metal.

S&P's Equity Research Services unit made the recommendation Wednesday. It is independent of the firm's Ratings Services division, which lowered its long-term credit rating on the nation's debt to AA-plus from triple-A with a long-term negative outlook Friday.

Gold futures tumbled today after CME Group, owner of the world's biggest futures market, increased margins on gold contracts by 22%. Gold had soared 8% in the previous three days, bringing a one-year gain to 49%, on U.S. and European debt concerns and a slowdown in global economic growth. Safe-haven investments, such as gold, Treasuries and the Swiss Franc, have benefited the most.

"We believe that gold is in a bull market," writes S&P analyst Leo Larkin in a research note, because demand will outstrip supply "for the foreseeable future.

"Gold's price still has room to run despite its stellar advance and we believe that the precious metal could also continue to carry the prices of certain gold-related equities right along with it," he added.

That's because current global output remains stagnant while there is huge central-bank buying by emerging-market countries and a wide range of investors due to the current market turmoil.

S&P expects gold prices and earnings for gold producers to continue rising through 2012, because the metal is seen as a safe-haven alternative to other assets in uncertain times.

"Weak economic data, possible sovereign-debt defaults and general financial market instability" have all contributed to acceleration in buying by investors, it said.

For mutual fund investors seeking to invest in gold producers, S&P recommends: Oppenheimer Gold & Specialized Minerals Fund (OPGSX), Van Eck International Investors Gold Fund (INIVX) and Tocqueville Gold Fund (TGLDX).

It targets three gold-industry stocks that it says are poised to outperform the market over the next 12 months: Barrick Gold (ABX), Newmont Mining (NEM) and Randgold Resources (GOLD).

In his argument in support of gold-producer stocks, Larkin said: They "have not been following the metal's meteoric rise. The reasons for the disparity are three-fold: share dilution, rising expenses and new ways to play gold."

"But the wide disparity between the precious metal and the companies that produce it is about to narrow for two reasons," he said. First, because gold companies are now generating enough free cash flow to fund internal expansion and external growth via acquisitions without having to resort to dilutive financing." And, second, because "gold is now rising faster than mining-input costs so there will be greater earnings per share leverage to the higher gold price."

Stock quotes in this article: OPGSX, INIVX, TGLDX, ABX, NEM, GOLD 

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto
Advertising Partners

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs