Figure 2 – Gold vs. the VIX and FAIL®: 2005-2010 (weekly)
Figure 3 – Gold in C$ vs. TSX Global Gold Index: One year (daily)
Source: Global Securities Research, Bloomberg
The Dow Jones Industrial Average’s intra-day decline of a record 998 points on May 6 (800 points of that drop occurred in less than 20 minutes) is a grim reminder that market volatility is back. Gold is currently shining as the safe haven of choice in this volatile environment. In my opinion, there is a distinct possibility of gold moving sharply higher in the near term, given that the euro currently appears quite vulnerable and may have another leg lower. Against this backdrop, Canadian gold miners may offer significant upside potential.
22 Planning for Profits | Report on Mining |Summer 2010
As Figure 3 demonstrates, the 49-member TSX Global Gold Index has now caught up with the price of bullion (denominated in Canadian dollars), after lagging it by a considerable margin earlier this year. However, with a number of producers trading well below their December highs even as gold appears on course to set new records, I believe this is as opportune a time as any to add quality gold stocks to diversified investment portfolios. (Elvis Picardo is Vice President – Research, and a strategist & analyst at Global Securities Corporation in Vancouver. The opinions expressed herein are his own).
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