It's time to get smart about gold.
Given the well-documented risks for further devaluation of the U.S. dollar going forward, I submit that some exposure to precious metals must be considered a prudent component of any well-balanced asset portfolio.
Which form that exposure takes -- whether it's a bullion instrument like SPDR Gold Shares
Likewise, the scale of one's allocation to gold and/or silver must be tailored to an individual's own degree of confidence in the long-term upward trajectory for precious metals.
I have reason to be hopeful about this, since 96% of respondents to a recent Motley Poll agreed that "Gold is money, and paper money is more impaired than ever before. Gold will continue to shine." For those intent upon scrutinizing the global macroeconomic landscape, and how it relates to the outlook for gold and silver prices, I offer the array of articles hyperlinked above and below.
The Fool community has been actively discussing gold and silver for several years running, and members are well-versed on the topic. Diverse perspectives are not only present, but celebrated. Newcomers are strongly encouraged to approach the Motley Fool CAPS community through the CAPS blogs with any questions or ideas they may have about this sector.
Where we stand today
Following an 18-month corrective phase, gold entered a new chapter in its multi-year bull market when prices finally broke through key resistance at the previous nominal high of $1,033 per ounce in early October 2009. The metal rocketed to a fresh high above $1,220 just two months later, prompting this Fool to raise some cash by parting with some shares of highfliers like IAMGOLD
With all the attention paid to junior miners of late, Fools may be surprised to discover that the Market Vectors Gold Miners ETF has actually fallen slightly further than its junior miner counterpart since this reversal took hold on Dec. 2. A strong relative showing by junior New Gold
Although I believe that multiple mining names are resplendent with golden prospects, the mid-tier and major miners in particular have fallen sufficiently from recent heights to warrant reinvigorated buying interest. With the possibility for near-term weakness notwithstanding (if metal prices continue to slump), shares of major miner Goldcorp
Yamana simply gleams
However, weighing the combined criteria of deep value, long-term production growth potential, and a high-quality operation with favorable ore and cost metrics, Yamana Gold
With combined proven and probable reserves of gold, silver, and copper in the ground carrying a present market value of about $62 billion, Yamana's modest $8.19 billion enterprise value is astonishing by comparison.
Incredibly, Monday's closing share price of $10.53 was first achieved by the stock in April of 2006! Although Yamana's share count has ballooned by 283% over the intervening period, massive value was generated by a corresponding 272% increase in gold reserves alongside an 80% surge in gold prices. More amazing still, the period in question also witnessed more than a tenfold increase in annual production -- from just 112,506 ounces in 2005 to 1.2 million GEOs in 2009. As if on cue, Yamana announced a positive construction decision for the Ernesto/Pau-a-pique project Tuesday morning, as well as an optimized mine plan for the exciting Agua Rica copper/gold project in Argentina.
These shares have appreciated 169% since I proclaimed that "Yawanna Have Yamana" back in October of 2008, but still remain 47% below their all-time high. Either Yamana Gold was among the most overvalued stocks in the equity universe back in 2006, or it's a screaming value today.
You be the judge: Vote in our Motley Poll, and share your thoughts about this struggling mining stock in the comments section below.
Fool contributor Christopher Barker's selection of Yamana Gold for his silverminer CAPS portfolio has outperformed the S&P 500 by roughly 132 percentage points since November 2008. The stock has earned four stars out of five, with more than 3,500 investors expecting further outperformance. Join the free Motley Fool CAPS community today, and share your own outlook for Yamana Gold.
Christopher Barker can be found blogging actively and acting Foolishly in the CAPS community under the user name TMFSinchiruna. He tweets. He owns shares of Coeur d'Alene Mines, IAMGOLD, New Gold, and Yamana Gold. The Motley Fool has a gilded disclosure policy.