This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
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
TheStreet Open House

Don't Walk, Run Away From Gold, Silver

Stocks in this article: GDX SLV ABX NEM GLD AUY GDXJ XG

India is a large net oil importer, and the biggest help India can receive to shore up the struggling rupee is a fall in the price of energy. Unfortunately for gold bulls, that is the last thing that will help gold. The cost of almost all goods and services are impacted by the price of energy, and lower energy costs equal lower inflationary pressure.

The impact of a stronger dollar is not limited to India. The Euro has fallen in the backdrop of various budgetary and economic implosions. In their attempt to keep the wheels from falling off, the European Central Bank resembles a player in the advanced stages of a "Whack-a-Mole" game. Each time the ECB uses their monetary hammer in response to the latest crisis popping up, another crisis pops up just as quickly.

The problems in Europe may give the false illusion that a flight to safe havens including gold will cause the demand for gold to increase; thereby causing the price to move higher. In a vacuum, monetary crises with multiple sovereign nations may indeed increase some types of gold demand. Where the higher gold demand theory derails are the casuistry or aberration of believing overall gold demand will increase. Those touting a flight to safety are performing a disservice for anyone listening.

Jewelry production is the greatest consumer of gold by far. Failing economies do not lend themselves to greater gold demand. Furthermore, relative to the drop in price gold has experienced in America, gold has not fallen as much in Europe due to the declining value of the Euro. Gold is trading for about 100 Euros off the all-time highs, compared to $300 off the high.

The impact on gold miners appears clear. Barrick Gold (ABX - Get Report), Goldcorp (GG), Anglogold Ashanti (AU), and Newmont Mining (NEM - Get Report) are near 52-week lows. One notable exception is Yamana Gold (AUY).

Yamana Gold recently opened up their checkbook and bought Extorre Gold Mines (XG). It remains to be seen if Extorre Gold is a sound investment or not. Extorre Gold is located in Argentina, and Argentinian President Cristina Kirchner has demonstrated an eagerness to place her own political career ahead of a free Argentinian capital market, stressing businesses there.

2 of 3

Check Out Our Best Services for Investors

Action Alerts PLUS

Jim Cramer and Stephanie Link reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

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
Stocks Under $10

Jim Cramer's protégé, 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
Try it NOW
Try it NOW
Try it NOW

Check Out Our Best Services for Investors

Dividend Stock Advisor

Jim Cramer's protégé, 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
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

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

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
Try it NOW
Try it NOW
Try it NOW
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.
Submit an article to us!

Markets

DOW 17,678.70 +6.10 0.03%
S&P 500 2,057.09 +5.27 0.26%
NASDAQ 4,771.7630 +13.8840 0.29%

Partners Compare Online Brokers

Free Reports

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