Gold: big levels and interesting company comments

Gold is flirting with breaking below that $1200/ounce level again.  As the last 3 year chart below for the yellow metal shows this is an important level to be paying attention to – back in July and December 2013 it marked the bottom ahead of a good trading upswing.  

Source: BigCharts.com

So what to think?  Well putting aside conspiracy this and conspiracy that we have to start with the Fed.  The end of QE and a push up for the dollar is classically not the best backdrop for gold.  Add in no immediately obvious inflation and a good GDP print the above price action cannot be the greatest surprise.  

Still there are a number of aspects that make gold a really interesting potential investment today.  Beyond various central banks around the world – including those in China and Russia – continuing to accumulate the 'barbarous relic' (as Keynes once put it) we have gold stocks.  

I came across an interesting chart the other date showing the price to book value for gold stocks with a $1 billion plus market cap.  Thanks to various write downs over the last couple of years the grouping is not quite back to the sub book rating seen about eighteen months ago but, after the last couple of shocking performance days for the space, it is getting ever closer.  

Source: Casey Research, Capital IQ

By my reckoning three gold companies (Barrick Gold, Yamana Gold and New Gold) of a reasonable size have reported their latest quarterly thoughts over the last day or so.  Aside from all three suffering a noticeable reversal in their share price today it was a comment by Barrick Gold specifically that caught my attention.  If business – at some level – is about making profit then the continued reduction in the company's 'all in sustainable cost' (AISC) of producing gold shows even at a depressed low sentiment gold price there is some hope.  

Source: Barrick Gold Q3 presentation document.

As it happens I have never been a huge fan of Barrick Gold versus some of the other large cap peers such as Randgold for example, but even I am impressed by some of their initiatives.  

In a low sentiment area when even companies you have struggled with in the past start making some sense then it is generally time to start paying attention.  I added to my gold stock positions today.