Since gold has started the year on a huge tear, every day you can find someone who's willing to say that it is "blowing off" and that its run is unsustainable. Listen, I'm perfectly willing to make a blow-off call if I think it's warranted, but I just don't see it in this case.
Fundamentally, in fact, I think gold is acting quite rationally. The Fed could have chosen to hold the line on interest rates, defend the dollar and let the long-overdue housing bubble burst run its course. Instead, it has chosen to slash rates and aggressively provide liquidity in the hopes of fending off a recession. And it isn't just the Fed; look for central banks around the world to aggressively join in on this act in 2008. Will it succeed? It might, it might not, but that added liquidity is going to go somewhere. Whether or not it stimulates some new sector of the economy to offset real estate, it's pretty darn reasonable to assume that liquidity will add to already-high commodity prices. Further, gold is not just an anti-U.S. dollar story and could rally against all currencies regardless of what the U.S. Dollar Index does this year, much like it did in 2005. The dollar made its recent low in late November. Since then, gold is up $100 an ounce. So, if gold is still playable, here are a few stocks that are worth examining: 1) Newmont Mining ( NEM) is an unhedged giant that produces gold in many corners of the world, from North America to South America to Asia. Gold bugs, who tend to dislike companies that hedge their production for any reason, tend to favor this stock as a leading large-cap choice. Newmont also mines some copper, silver and zinc. Its previous president, Pierre Lassonde, was well-liked in the gold bug community for his always-bullish outlook on metals prices, but the company often struggled to contain costs. The company may be in better hands under Richard O'Brien, who stepped in last year.