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| A Perfect Gold Setup Over a quarter of the world is now enduring negative interest rates. Global economies won't heal. The word "recession" is being tossed around again. It's a perfect setup for gold and gold stocks to surge higher. Here's one of the best ways to maximize the coming gold gains. |
| Investor Alert: Gold $1,300! | ||||||
| By Luke Burgess | Monday, May 2, 2016 | ||||||
 ***INVESTOR ALERT*** The price of gold just broke through $1,300 an ounce — a key psychological level for gold right now. Gold prices haven't seen $1,300 territory since January 2015. We can expect $1,300 gold to be big news today. But we need to keep cool, here... Gold increased 5.5% during the month of April — ending 14 of 21 trading days with higher prices. And with such upward movement over the past few weeks, it's difficult to imagine profit-taking won't slow gold's roll in the very near term. Coupled with the “sell in May” mentality, I don't think I want to be much of a gold buyer this week. Of course, I plan to keep my long-term core gold positions. But I'd like to see a pullback in prices to at least $1,275 an ounce before adding to my portfolio right now. In the meantime, I want to look at another metal that's not getting much positive attention: copper.
Over the past two weeks or so, copper has received a lot of bad press. Copper prices have shed 50% since their 2011 highs of nearly $4.50 per pound — dipping below $2.00 per pound back in January. As a result, major consumers (like China) are taking advantage of the recently discounted prices by purchasing and stockpiling the metal for later use. A recent Wall Street Journal article showed significant amounts of China's refined copper imports were being warehoused by the Shanghai Futures Exchange, where inventory is currently at an all-time high.
This stockpiling is among the most recent negative sentiments that have popped up surrounding copper. And in the short term, Chinese stockpiling certainly could mean downside when they turn to using their stocks rather than buying. But it could also mean that they believe prices are at a bottom. The fact is, copper's importance cannot be exaggerated. It's the third most commonly used metal in the world after iron and aluminum — consumed by every major industry in every country. While I'm not especially bullish on copper for the short term, I want to use all the negative sentiment surrounding the red metal to establish a few mid- to long-term positions.
On Friday, I mentioned a mid-tier copper producer that I keep on my radar: Nevsun Resources (NYSE: NSU).
Nevsun is the 60% owner of the Bisha copper/zinc mine, located in Eritrea. (I had no clue where that was either until first finding Nevsun... it's in East Africa.) The Bisha mine is a low-cost, high-grade operation that produced 136 million pounds of copper last year for Nevsun. This year, the company forecasts a small dip in copper production to about 110 million pounds. However, an expansion project at the Bisha mine is expected to add 70 to 100 million pounds of brand new zinc production — which will more than make up for the drop in copper production in terms of revenue. The company has no debt and plenty of cash in the bank. Shares of NSU are still trading under $4.00. And I like this company as a mid- to long-term play.
I also mentioned Southern Copper (NYSE: SCCO) to you on Friday. And although shares are a little more expensive, I think SCCO is my favorite copper stock right now.
Southern Copper is among the world's top 10 largest public copper producers. The company produced 743,000 tons of copper in 2015, which was an increase of nearly 10% from the previous year. This year, Southern Copper expects its copper production to increase another +20% to over 900,000 tons. Additionally, the company forecasts an increase to its byproduct production of zinc by 41% and silver by 21%. Shares of SCCO were held back a bit last week on news that net profit dropped during the first quarter. But with production and commodity prices on the rise, I really like SCCO for the mid to long term. I think the next few weeks could provide some great buying opportunities for both of these mid- to long-term plays. Good Investing,
Copper Charts
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