Only Pessimists Buy Gold

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A stock report on Newmont Mining Corporation

Newmont Mining Corporation is a diversified holding company founded in 1916 by William Boyce Thompson. Specializing in gold investments, Newmont has an approximate reservation of 92 million ounces of gold in equity and operates mines spanning across 5 continents. Due to the fact that Newmont Mining Corporation primarily invests in gold, it would make sense that the price of the corporation’s stock varies directly with that of gold.

 

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Generally speaking, the price of gold varies inversely with the value of the US dollar and does well in times of economic uncertainty. This would explain why gold hit a record high price of almost $1,900 immediately following the 2008 market-recession. In mid-January of 2016, the price of gold hit a 5 year low of around $1,050. Since then, it has risen about $300 and, although it just recently dipped, there are signs of further rise in price. The price of the Newport Mining Materials stock has been predictably following alongside this trend over the same time-period.

The recent drop in the price of gold was caused by the strengthening of the dollar and the uncertainty around whether or not the Federal Reserve would raise interest rates. When the American dollar is more valuable, it costs more for foreign investors to buy US gold, consequently causing a decrease in gold demand – thus driving the price of gold down. For one to be bullish, or optimistic, on the price of gold, they must be bearish, or pessimistic, on the value of the dollar.

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Though the economy has regained strength since the 2008 recession, there are signs, such Deutsche Bank’s refusal to pay the US government a 13 billion-dollar fine for mis-selling mortgage backed securities, that suggest a potential lagging of global markets. The United Nations Conference on Trade and development, in a recent report, hinted towards the possibility of a 3rd stage of the 2008 Financial crisis caused by “deflationary spirals” attributed to Deutsche Bank’s potential crash. Though betting on a recession may feel unsettling, it could yield a handsome return. Even if Deutsche Bank doesn’t crash, the market uncertainty leading up to such an event may drive the price of gold up substantially.

 

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Based on the current state of the economy, It is safe to say that an increase in gold price is likely, however it is not certain. When considering risky investments, any seasoned investor takes into account their risk-to-reward ratio. According to 15 market analysts contributing The Financial Times market analytics section, their optimistic prediction for the price of NEM in 12 months is a rise to $59.00 per share (70.6% increase) their lower, more realistic prediction is a rise to $41.00 per share (18.5% increase), and their median prediction is a rise to $47.00 per share (35.9% increase). According to these predictions, there is a very low risk of losing money on this stock in the long run – making the risk-to-reward ratio extremely favorable. Because of impending market insecurity, it is a great time to buy Newmont Mining corporation, as well as other gold reliant stocks.

 

Read More Here:

http://www.newmont.com/home/default.aspxhttp://www.investopedia.com/financial-edge/0311/what-drives-the-price-of-gold.aspx

https://www.bullionvault.com/gold-price-chart.do

http://247wallst.com/economy/2016/09/11/deutsche-bank-the-us-may-now-be-in-a-recession/

http://www.usagold.com/cpmforum/

About the author

Joseph Smith is 17 years old, a resident of Westborough, Massachusetts, and a member of the class of 2017 at St. Mark’s School. He plans on getting undergraduate degrees in economics and computer science. He is involved in several leadership positions at St. Mark’s, including sustainability prefect and captain of the varsity golf team. He enjoys traveling, computer programming, graphic design, golf and squash. Joseph is also a passionate humanitarian; last summer he spent 3 weeks volunteering as a counsellor at Brantwood sleep-away Camp for the underprivileged and has spent hours upon hours volunteering at the Boys and Girls Club of Marlborough, during his sophomore and junior years. Joseph is a STEM Research Fellow at St. Mark's working on a data manipulation, allocation, compression and analytics algorithm.

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