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Gold Up, Oil Down... It's Time to Buy Gold Stocks

By Dr. Steve Sjuggerud
Wednesday, August 24, 2011

Today's message is incredibly simple... But it could make you a lot of money.
Right now is the absolute ideal environment for gold mining companies to deliver record profits.
Let me explain why...
Like any business, gold mining companies have sales and expenses. Some people say mining is a terrible business, because you can't control the price of your sales or the price of your expenses. But fortunately, today, the prices of both are seriously in the favor of mining companies...
Gold miners sell gold, of course. So when the price of gold goes up, sales go up.
The crucial expense for mining companies is the cost of fuel... In short, it costs a fortune in fuel to feed the machines that move the earth to get to the gold. When the price of fuel goes down, gold miners' expenses go down.
Fortunately for gold miners these days, the price of gold is up dramatically... and the price of fuel is down dramatically. Take a look:
Gold Up Nearly $400 an Ounce Since May
Oil Down 25% Since May
These dramatic changes in the price of gold and the price of oil benefit gold mining companies dramatically. But since May, the price of gold mining companies is flat. Take a look:
Gold Prices Up, But Gold Miners Remain Flat
In short, because the price of gold is up and the price of oil is down, gold mining companies should set all kinds of quarterly earnings records in the third quarter of 2011.
Record earnings in gold mining companies should help propel their stock prices.
Yet you have the opportunity today to buy into gold mining companies at May 2011 prices, before the spike in gold and the crash in oil.
Take advantage of it.
The simplest ways to get broad exposure to gold mining companies is through two exchange-traded funds: GDX (the gold miners fund) and GDXJ (the junior gold miners fund).
The price of gold has run up since May. But the price of these two funds has not.
To me, buying these two ETFs is a safer bet than gold right now. Check 'em out...
Good investing,

Further Reading:

Steve recently checked in with gold coin expert Van Simmons. Van told Steve about a gold coin he's personally buying today. Get the details here: What My Most Trusted Gold Insider Is Buying.
"Its business is driving to the bank and cashing royalty checks," Steve writes. "When your business is depositing big checks payable to you, it's near impossible to lose money." He's predicting triple-digit returns in two years with this gold stock.

Market Notes


On August 8th, we noted how Royal Gold has become an "investment rarity." The unique gold company was one of the few stocks to hold steady during the recent selling panic.
Today, we feature another rarity... one confirms our idea that if you want to make a fortune in developing markets like China and Indonesia, it's best to stick with the "basics." It's best to own dominant global companies that sell things like soda, cigarettes, and fuel. "Boring" products like these enjoy steady, unrelenting demand... And there's scant risk some new technology will make having a beer after work obsolete. Well-run companies in these industries generate steady cash flow and big dividends.
One of the "basics" leaders we've featured many times is Philip Morris International (PM). A longtime recommendation of our colleague Dan Ferris, PM is the international offshoot of U.S. cigarette powerhouse Altria, which makes it the largest international vendor of cigarettes in the world... and a direct play on the world's growing middle class, much of which is in Asia.
As you can see from our one-year chart of PM, selling the basics isn't just a good offense that produces gains... It's also a good defense. While stocks of all types have crashed to multi-year lows in the past month, PM has held like a rock. We state once again: Selling the basics ain't pretty, but it works.

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