The Path to $20,000 Gold

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Angry Bear Blog

If the ratio between the SGP and actual gold prices stays constant, gold could be $3,400 per ounce by 2015!

If gold rallies anywhere close to $3,400 by 2015 (QB Asset Management’s scenario), quality gold mining stocks could rally by several hundred percent.

Of the bunch, I urge you to consider midsized gold miners.

Capital costs for new mines have skyrocketed at large gold mining companies. For example, the doubling of development costs for a project high in the Andes Mountains sent investors fleeing from Barrick Gold (ABX).

Investors will pay a premium for gold miners with consistent execution and low, stable cash costs. That’s why I suggest you consider the midsized players. One company I’ve suggested to my readers is Agnico-Eagle Mines (AEM) but there are plenty others in the midsize field (including, Yamana Gold, Eldorado Gold, New Gold, Randgold Resources, IAMGOLD Corp and more.)

Let’s assume QB Asset Management’s scenario: a steady doubling in gold prices over the next three years. Many midsized miners would produce vast amounts of free cash flow in 2014. Any rise in gold prices above cash costs flows straight to the bottom line. The most shareholder-friendly companies, will return this cash to shareholders, rather than reinvest in the ground when project costs are too high.

Such a scenario would grab the attention of mainstream investors. Investors who now ignore gold stocks would fall in love with them. High-quality gold stocks remain very cheap and will one day become expensive. Meanwhile, dividend yields pay you to wait.