With gold at an eight-year high, is there value in the mines?
Last year, the world's largest operator, Newmont Mines
Even if Newmont manages to sell next year at today's $416 an ounce (a $50 premium to last quarter's average), the stock would still go for roughly 30 times earnings. A great company with great assets, Newmont is hardly a value.
Other large miners like Placer Dome
More moderate multiples can be found with the smaller miners. Richmont Mines
Investors might also check out stocks like Freeport-McMoRan
Still, before putting too much stock in gold, consider the point Mathew Emmert made earlier this year. "A dollar invested in gold about 200 years ago would be worth about, well, a dollar today (adjusted for inflation)." That's not a good thing.
Two other factors do not work in gold's long-term favor. First, almost all the gold ever mined is unused (it just sits in vaults or is passed down as jewelry from generation to generation). Second, as the price increases, previously uneconomical reserves will be mined and swell supply.
Perhaps ironically, given its reputation as a store of value, gold is a highly speculative investment at today's prices.
W.D. Crotty likes to discuss gold and other metals with other investors on The Motley Fool's Mining and Metals discussion board.
You can e-mail W.D. at firstname.lastname@example.org.