Monday, February 1, 2010

Barrick Gold (NYSE:ABX) Goldcorp (TSX:G, NYSE:GG) Down Over 25 Percent

Barrick Gold (NYSE:ABX) Goldcorp (TSX:G, NYSE:GG)

Barrick Gold (NYSE:ABX) and Goldcorp (TSX:G, NYSE:GG) have joined other gold companies in participating in the downward pressure on gold prices, as they are down by over 25 percent each as the dollar strengthens.

This isn't going to last of course, as the outrageous data giving the illusion the U.S. economy is growing is largely based on numbers largely inflated by an adjustment in inventory which made it look like the GDP had gainted 5.7 percent. In truth, as David Rosenberg stated, without that adjustment, the GDP would have increased only by 2.2 percent, which would have sent off warning bells (as it still should), as it would have been far below the 4.8 percent Bloomberg analysts had been looking for.

Other major problems pointed out by Rosenberg were that growth from imports decreased by 50 percent in the fourth quarter. He added that the hard data contradicts the one-off numbers, as home sales, housing starts and consumer spending confirm “there is little, if any, momentum heading into early 2010.” He even believes there are at least another five years or so before the entire credit collapse and lower spending plays itself out.

In other words, gold will rebound as the news gets out these were largly irrelevant numbers.

Assuming the time-frame of Rosenberg is correct, or at least within close proximity to his assertion, it is likely that gold will continue to rise as inflation increases and central bank policies remain in place because they're caught in a trap they have no way of getting out of.

Consequently, gold prices will continue to rise, and companies related to the yellow metal will rise with those prices.

Barrick Gold (NYSE:ABX) Goldcorp (TSX:G, NYSE:GG)

1 comment:

John Ryskamp said...

Since when is gold going to take off because prices collapse because demand is collapsing? I suppose prices might go up if you are talking about a decline in capacity, but a decline in capacity to the extent of inflation, means Austria 1919 style inflation--total social collapse inflation.

Is that what you are predicting? I suppose, since the economic is oligopolistic-monopolistic, prices will rise for things for which there are captive markets (workers needing to drive to work, so jack up the price of gas all you want), but where will the other price increases come from?