$76 Billion Reasons to Sell Gold Stocks!

I have seen some strange things in the almost 20 years since we have been tinkering with our model price charts but this one takes the cake.  Have a look at these three model price charts.

Barrick Gold Corp.

Barrick Gold Corp. with weekly price bars, EBV Lines (colored lines) and model price (dashed line)

Barrick Gold Corp. with weekly price bars, EBV Lines (colored lines) and model price (dashed line)

For those interested, a daily updated chart of ABX subsequent to this post will be maintained on Facebook, here.

Goldcorp Inc.

Goldcorp Inc. with weekly price bars, EBV Lines (colored lines) and model price (dashed line)

Goldcorp Inc. with weekly price bars, EBV Lines (colored lines) and model price (dashed line)

For those interested, a daily updated chart of GG subsequent to this post will be maintained on Facebook, here.

Newmont Mining Corp.

Newmont Mining Corp. with weekly price bars, EBV Lines (colored lines) and model price (dashed line)

Newmont Mining Corp. with weekly price bars, EBV Lines (colored lines) and model price (dashed line)

For those interested, a daily updated chart of NEM subsequent to this post will be maintained on Facebook, here.

All three companies, all major gold mining companies, had negative transits not only on the same week but also on the same day!  Wow, I have to admit I haven’t seen this in quite some time – if ever.

Just for fun I added the market capitalizations of all three of these companies with an aggregate total of $76 US billion – hence the title of my blog.

All three of these companies had a negative transit of either EBV+2 or EBV+1 this week implying lower prices for all three of these companies in the future.

Who do you believe, analysts or the market?

As you will notice, all three have calculated model prices substantially above where the companies’ shares are trading.  Remember we are delivering two separate calculations for our readers.  The model price calculation or fair market value and our Economic Book Value (EBV) lines.  Our model price calculation is largely influenced by analysts’ mean earnings estimates.  Our EBV lines are a function of the company’s balance sheet.  The market is signalling lower prices in the future, by a negative transit, where the analysts may be late in recognizing that lower earnings estimates may be warranted in the future.  In other words, analysts are usually wrong, as a group, especially at secular tops or bottoms, until future negative news is well known with resulting adjustments in downward estimates are made as a result.

In this instance I believe what the market is communicating – lower prices ahead – and in time I’m sure the analysts will follow with lower estimates thereby reducing our model price calculations.

Maybe a more interesting question is “Are we seeing a secular decline in gold or gold related investments?”  Time will tell however something is surely going on when a sell signal is clearly given this past week with these three major gold producers.

One response to “$76 Billion Reasons to Sell Gold Stocks!

  1. Marcin Buffett February 28, 2013 at 2:39 pm

    Inclusions “all-in costs” on the their F/S will change valuations of gold companies.
    http://watch.bnn.ca/#clip873908

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