Golden Opportunities

This article is part of our Rising Star Portfolios series.

Six months ago, gold cost $1,250 an ounce, and pundits were calling it a bubble. Since then, gold has risen to $1,400 an ounce, and gold mining shares have banked bodacious gains – all of which those skeptics have missed.

Consider this: In the past six months, NovaGold Resources (AMEX: NG  ) shares are up around 75%, while New Gold (AMEX: NGD  ) shares have jumped more than 50%. This shows the power of leverage: Like many mining companies, costs for NovaGold and New Gold are relatively high and fixed, so a higher selling price contributes a lot of gravy to profits. In a rising gold price environment, these companies can generate great returns for investors. Alas, while I like these two companies, they clearly don't offer as much value as they did six months ago.

But fear not -- you haven't missed the boat. Surprisingly, a few mining stocks have barely moved in the past six months, even as their competitors have soared. That gives us a chance to get into the game. I'm looking at two in particular: the aptly named Minefinders (AMEX: MFN  ) and Northgate Minerals (AMEX: NXG  ) . Both have upside potential in their operations, and both have hardly budged this year, even as gold has continued its ascent.

Gold's party isn't over
To take a step back, I'm very bullish on the yellow metal for several reasons. First, gold is nowhere near its prior highs in relation to inflation, equities, or money supply.

Second, gold is getting pushed upward by the inane actions of the Federal Reserve. For perhaps the first time in history, the Fed is attempting to create inflation -- an absurd policy. We (but clearly not the Fed) learned from the housing bubble that artificially sustaining demand through low interest rates leads to asset bubbles and havoc in the future. Propping up asset prices doesn't create wealth or economic growth; to best protect yourself from this ongoing devaluation of financial assets, diversify into tangible assets.

Third, central banks understand this, and countries like Russia, India, and China have all been purchasing gold over the past year and a half, lending tacit support for the metal as money, and hence the basis of a new currency.

This is clearly a coming-out party for gold, and given the frosty reception to World Bank President Robert Zoellick's comments this week that gold deserves a greater role in the world monetary system, you can be assured that gold hasn't come out of the cold just yet. This is wonderful, because it means there's still enough time to get in on the new gold rush.

Golden opportunities
When I analyzed the mining sector six months ago, both Minefinders and Northgate appeared reasonable on their own merits. But since then, gold has advanced 12% -- which increases these companies' real value even more, given the leverage in their business models. Moreover, competitor valuations have skyrocketed, making the stocks cheaper on a relative basis. This gets me excited, and I plan to invest my first $1,000 into one of these companies. To find out which one, stay tuned!

This article is part of our Rising Star Portfolios series, where we give some of our most promising stock analysts cold, hard cash to manage on the Fool's behalf. We'd like you to track our performance and benefit from these real-money, real-time free stock picks. Click here to see all of our Rising Star analysts (and their portfolios).