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Gold Miners Are at Best Value Since 2010

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(Kitco News) - Now is the time to be buying gold mining stocks when prices are deflated instead of waiting until everything is on its way up, said Jonathan Goodman, executive chairman of Dundee Corp.

"If you look at the GDXJ [VanEck Vectors Junior Gold Miners ETF] and go back to 2010, the adjusted return in Canadian dollars is down about 85%. Then if you look deeper ... at the really junior juniors, which aren't even in these ETFs, it's even more so. We have an industry where you've lost 80% to 90% of the value--plus," Goodman told Kitco News on the sidelines of the 121 Mining Investment conference.

The price of gold has not been the reason mining stocks have suffered, added Goodman. He notes that gold prices relative to currency are not far from historic highs.

"If you take the gold price today and convert it into Canadian dollars, it's actually not far off from where it was in 2011 at the peak of gold prices when gold hit $2,000 U.S. The Canadian dollar was at a premium to the U.S. dollar at that time, and it was around $1,800 to $1,900 Canadian. Today's it's at $1,700 Canadian and higher, and in many currencies gold prices have not really dropped," he said.

Rather, the mining sector has experienced mistakes made from the miners themselves, as well as poor choices from investors to give "...the wrong money to the wrong people at the wrong time."

On making the right investment choices, Goodman said that only about 25% to 30% of producing mines make money, so it is important to dive deep into the geology of the mines' deposits to accurately determine value. Goodman said that all commodities look attractive right now, and the economy is in a "weird" place.

"An inverted [yield curve] almost always leads to an economic slowdown, and it probably already has happened," he said, "[I] recognize that the Fed is already starting to drop rates. We're in a very weird environment."

Historically, Goodman said interest rates have been much higher when the Fed has decided to cut rates.

Ultimately, Goodman said gold should still be bought as a hedge against rising debt levels and depreciating currencies.

"I remember when rates were much higher...and the reality is there's so much debt out there. This whole deficit society where governments--and this isn't just a U.S. thing--is across the whole world. Governments spend more than they take in, and that is not sustainable.

"We saw what happened to Greece, and that is why you buy gold," he said.

Watch the full interview on Kitco News

This article is commentary by an independent contributor. At the time of publication, the author held TK positions in the stocks mentioned.

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