Reserves in ground make gold stocks incredibly cheap - Coxe

During a recent conference call, BMO's Don Coxe stressed gold stocks are a solid investment-in the long run and that gold will gain in importance as banking crisis drags on.

Author: Dorothy Kosich
Posted: Monday , 11 Jun 2012

RENO (MINEWEB) -

In recent conference call to clients, BMO Global Strategist Don Coxe advised, "One way or another I think gold is going to be more important from now on than it is today, and I'd like to see you people share in that."

As the entire banking system in the Eurozone remains at risk from Eurozone crisis, Coxe doesn't "see a way of getting out of this without bringing gold back in somehow-I will applaud them if they can find a way to do that-- but in the meantime it's another reason for our continued support of investing in gold..."

However, Coxe believes "the best way to do this is no longer the bullion, it's the stocks, and we've given you a variety of reasons for it."

"The miners hold all the future gold," he observed. "The big advantage you have is you acquire unhedged reserves in the ground in politically secured areas of the world."

"Another way of looking at that is not to use the figures the gold mining companies use, (which they are required to) which is the average price of the metal over the last three years," Coxe advised. "It's better to use the gold futures curve, which is in contango and that if you could use that, and I am not saying legally you could, but you as an investor can say, "The contango is saying that gold prices are going to be stronger in the future than they are today, and I get all these ounces of gold when I buy a good mining company."

Coxe stressed gold stocks are a solid investment-in the long run...

"So not only are they incredibly cheap, (relative to their earnings) which means out of the current price of gold, but the real value relative to buying the GLD or just bullions is all those years and years of reserves in the ground," he noted.

Gold no longer four-letter word for elitists

"I believe the elites for a long, long time have regarded gold as irrelevant and a nuisance, but what is interesting is that despite that, these countries didn't dispose of their gold and in fact central banks have been nibbling away at adding to their reserves," Coxe observed.

"One way or another I think gold is going to be more important a year from now than it is today, and I'd like to see that you people share in that," he concluded.