Selection

Goldline has an impressive selection of gold, silver, platinum and palladium coins and bars dating from the 1800s. They offer numismatics, special collector's items, bullion coins and bars. The gold bars available weigh 1 ounce, 10 ounce or 1 kilogram.

The site does a nice job of designating the "IRA-eligible" coins. Goldline is an exclusive dealer for limited-production gold collector's coins. Goldline has one of the largest Austrian gold numismatic coin collections around.

Reputation

Glenn Beck is the spokesman for Goldline. Very few bullion dealers have this much notoriety. Goldline has been a precious metals dealer since 1960. It has a legitimate physical Santa Monica, California address with listings of its company executives.

These all signify that Goldline is a legitimate bullion dealer. The site has a very professional look. For lower-priced purchases, you can use your credit card at the online site. For higher-priced amounts, you must call by telephone to get "Investor Pricing."

The "Special Accumulation Program" debits your bank account each month so that you can accumulate precious metals gradually. Follow-up customer service is very good.

Education

The online site for Goldline has an abundance of information available. The primary goal is to explain "Why wealthy people should invest in gold." These resources discuss the FDR confiscation order, fiat currency inflation and the history of precious metals.

This education is great for beginners. Even experienced gold and silver coin collectors will learn from the volume of information available on the Goldline website. Other bullion dealers focus more on individual coins. The education at Goldline is top-of-the-line.

Pricing

Just like a full-service gasoline station, Goldline is more expensive. It provides more services to its customers. There is a "Price Guarantee Program" for short-term changes and a "Client Concierge" to help with questions. You can get physical delivery or storage services.

"At the time of our review update, Goldline's only Bullion Gold American Eagles in stock were the 1 oz coins and it was selling for over $37.54 more than Bullion Direct. Goldline's 1 oz Bullion Silver American Eagles were selling for over $8.34 more than Lear Capital."
- National Inflation Association 

This is a well-recognized bullion dealer. Pricing is more difficult to get at Goldline. Most bullion sites will quote you a certain amount above the spot price.

At Goldline, you will be charged commissions, fees and a spread. Calculate this ahead of time before you complete your purchase. Gold is a premium product and purchases should not be made without careful consideration. Goldline gives you all the information you need to make a well-informed decision.

Disadvantages

Goldline has some detractors who share a common trait - they wanted to make money quickly by purchasing bullion coins. Goldline sold many of these critics expensive numismatic coins. When these dissatisfied customers tried to resell their numismatic coins, they found out the demand was lower than for bullion coins.

The precious metals purchased on Goldline are more expensive than the competition. There are many add-on costs involved. Other precious metal sites are better for buying large volumes of cheap bullion coins.

Why Invest in Gold?

The perfect customer for Goldline is a wealthy individual who wants to buy small quantities of rare numismatic coins and hold for the long-term. The site's educational material is top-notch. It helps you make a good decision.

Goldline offers great customer service when buying. Goldline has good security, transparency, legitimacy, selection and educational features. Goldline is the cream of the crop amongst bullion dealers.

Product Selection

Monex offers a wide selection of investment products like gold, platinum, silver and palladium. Gold or silver ingots with pure bullion cast are available. They also sell coins with a currency value.

Gold Bullion is available in three convenient forms at Monex. This includes 10-ounce gold bullion with .995 purity, 32.15 troy ounce gold kilobar with .999 purity and 10-ounce gold bullion ingot with .9999 purity.

Monex sells Gold Vienna Philharmonic coins in four sizes. This includes the one-ounce coin with a 37mm diameter and 2mm thickness, the half-ounce coin with a 28mm diameter and 1.6mm thickness, a quarter-ounce coin with a 22mm diameter and 1.20mm thickness, a tenth-ounce coin with 16mm diameter and 1.20mm thickness.

Gold American Eagle are available with four sizes and denominations that investors can buy from Monex. This includes the one-ounce coin with a 32.7 diameter and 2.87mm thickness with a $50 face value. In addition, there is also a half-ounce gold coin with a 27mm diameter and 2.15mm thickness, a quarter-ounce coin with a 22mm diameter and 1.78mm thickness and a tenth-ounce coin with a 16.5mm diameter and 1.26mm thickness.

Monex offers different fractional sizes of Canadian Maple Leaf coins. This includes the half-ounce coin with a 25mm diameter and 2.23mm thickness with a 10 Canadian dollar face value, a quarter-troy ounce coin with a 20mm diameter and 1.78mm thickness with a 10 Canadian dollar face value and a tenth-ounce coin with a 16mm diameter and 1.13mm thickness at 5 Canadian dollars.

The South African krugerrand weighs 33.930 grams. This 22-karat coin has a 32.6mm diameter and 2.74mm thickness. Monex only offers these one-ounce coins in units of ten.

In addition to the various gold offerings, Monex also offers a wide selection of Silver Bullion:

• Silver Bullion, Monex offers pure .999 fine silver bullion available in 1,000 ounce and 100 ounce silver bars.
• Silver Vienna Philharmonics offering 100 units of one-ounce Silver Vienna Philharmonics coins.
• Silver Canadian Maple Leafs: Monex offers silver bullion in units of 100 one-ounce coins. Each coin has a 38mm diameter and 3.87mm thickness. The reverse side features Canada’s national maple leaf symbol with Queen Elizabeth II on the front.
• Silver American Eagles in units of 100 one-ounce Silver American Eagle coins.
• 40 Percent Silver U.S. Coin Bag: Monex offers $1000 face value for each 40 percent silver U.S. coin bag that contain approximately 295 ounces of pure silver or 2,000 Kennedy half-dollars.
• 90 Percent Silver U.S. Coin Bag is offered by the 90 percent silver bags that contain either 4,000 U.S. quarters or 10,000 U.S. dimes from 1964.

Pricing

Monex shows live pricing on its website. Investors can see if their bullion or coin’s value goes up or down. Each spot commodity is organized in a chart where their previous and current prices are being compared. With this, investors can see the fluctuation in value. Monex has the most updated and accurate pricing in the industry. The prices are very clear along with the difference from the last business day.

Reputation

Although Monex claims to have built a strong reputation in the industry, there are many customers who disagree. With this, there were 39 closed complaints filed with the Better Business Bureau against the company in three years. Most of these issues are related to sales. According to the BBB, these complaints come from consumers who experienced substantial financial losses due to company sales representatives. They said that these sales agents were not following instructions and failed to keep them informed about their orders.

When it comes to selection, Monex has it all. However, there were some customer complaints that say Monex does not have all the coins and bullion on hand when they get orders. Some deliveries are delayed because Monex still has to obtain stock in order to send items to customers.

Some of these coins have to be bought in sets of 10. This means customers may not be able to buy as much as they want. Some find this strategy inconvenient. Nevertheless, Monex has the best selection of silver, gold, platinum and palladium coins and bullion.

This is the sixth in a series of articles analyzing the current status of gold stocks. Earlier this year, Silver Monthly analyzed several silver stocks, and we reviewed some common investment concepts in our first analysis of Silver Wheaton. To brush up on some terminology, go to that article. Otherwise, continue reading.

Business Model

AngloGold Ashanti is the third largest gold producer in the world. It came into being in 2004, when Anglo American merged its gold assets with Ashanti Goldfields. Anglo American sold its last stakes in the company in 2009. Now AngloGold Ashanti is focused on expanding its production away from South Africa. This is wise, since right now, AngloGold’s costs are above average, thanks to the fact that South Africa and continental Africa tend to be higher-cost gold mining districts.

Historically, AngloGold has invested less in growing its business than most of its peers, which has resulted in exactly what you’d expect: slower growth. This is because AngloGold Ashanti had hedged against falling gold prices by selling forward contracts, and this prevented the firm from benefitting from the recent explosion in bullion prices. In late 2010, AngloGold finally eliminated the last of its hedges – just in time for the gold price to crash! On the positive side, this also freed up more cash for AngloGold Ashanti to make investments and to try to lower its production costs by diversifying its business base.

AngloGold Ashanti is growing in Australia and South America, which have lower costs than Africa – but these operations won’t be in full swing for years. In the meantime, the firm and its investors have to contend with serious geopolitical risks by operating in the Democratic Republic of Congo and Mali. Even Argentina, where AngloGold has a lot of its South American operations, is a political hotbed. AngloGold Ashanti’s management has made the right decision to try to diversify out of Africa, but it may have come too late.

Financials

In 2011, AngloGold Ashanti reported net income of $1.43 billion on sales of $6.64 billion. Both of these numbers were up from 2010, when the firm reported income of $112 million on sales of $5.4 billion. In each of the previous three years, AngloGold Ashanti posted net losses: starting in 2007 at $814 million, then $563 million, and then $825 million. On the earnings front, AngloGold Ashanti has certainly been headed in the right direction. In terms of sales, this is also true, as AngloGold Ashanti has grown its top line every year since 2005.

But how about more recent data? Last quarter, AngloGold Ashanti beat earnings expectations and grew EPS by 98%. This brought its three-quarter average for EPS growth to an amazing 262% per quarter! Estimates for the current quarter – the results of which will be announced on August 4 – project a 20% decline in earnings per share, but this is still better than previously expected, as management raised guidance at the company’s most recent earnings call. Sales were up 20% last quarter, which is good.

Valuation

From a valuation perspective, AngloGold Ashanti looks like a great buy. Its price-to-earnings ratio of just 8.7 is well under the industry average of 22.8, and even further below its own five-year average P/E ratio of 25.9. Its price-to-book ratio of 2.2 is a bit higher than the industry average of 1.6, but much lower than its own five-year average of 3.9. Its price-to-sales ratio of 2.0 is below both the industry average of 3.4, and its own five-year average of 3.1. The same is true of AngloGold Ashanti’s price-to-cash flow multiple, although in this case, the distinction is much greater: 5.2 versus 9.5 and 18.9. And, most attractively of all, AngloGold Ashanti pays a 1.8% dividend, which is three times its historical average, and one of the highest dividend yields of any gold stock you’ll find.

Technicals

From a technical perspective, AngloGold Ashanti looks as though it may be oversold, with a Money Flow Index of 26.75 and a Williams %R of -92.07%. Still, this doesn’t move me to want to buy the stock, even in the short term, as its chart is in a clear and inarguable downtrend, riding its steeply descending bottom Bollinger band lower. AngloGold Ashanti may be nearing a bottom, and it may indeed launch into a bullish surge back to the high $30s – but stock-picking is a probabilities game, and stocks with charts like AngloGold Ashanti are just not statistically likely to do anything but continue losing ground.

Conclusion

In conclusion, with AngloGold Ashanti, we have yet another gold stock that looks to be headed lower. Yes, its valuation metrics make it look like a good buy, but with its business-model problems and a textbook bearish chart, there are definitely better buys out there than AngloGold Ashanti. Even the ultra-low MFI and Williams %R aren’t enough to make me want to give AngloGold a second look. And I don’t think you should, either.

This is the fourth in a series of articles analyzing the current status of gold stocks. Earlier this year, Silver Monthly analyzed several silver stocks, and we reviewed some common investment concepts in our first analysis of Silver Wheaton. To brush up on some terminology, go to that article. Otherwise, continue reading.

Financials

Last year, Franco-Nevada reported a net loss of $6.8 million on record revenue of $411.2 million. However, last quarter, the firm grew EPS by 63% year-over-year, and over the past three quarters, it has averaged EPS growth of 92% per quarter. Estimates for the current quarter were revised lower, but earnings per share are still expected to grow by 23%, year-over-year. And for the year, Franco-Nevada is expected to grow earnings by 18.5%.

Revenues were up 44% last quarter, beating Franco-Nevada’s three-year average for annual revenue growth of 42%. This is especially great considering how depressed the gold price has been thus far in 2012. Franco-Nevada has a huge pretax profit margin of 48.5%. It has $1 billion in cash, and zero debt – now that’s a balance sheet that truly is “good as gold.”

Valuation

Franco-Nevada’s 322.6 trailing P/E reflects its 2011 dip in earnings. More telling is its 21.3 price-to-cash flow ratio, which is just about in line with its 21.2 five-year average. However, it’s difficult to say if this is a fair valuation or not, since there really aren’t a lot of other firms with Franco-Nevada’s business model. Thus, its 2.2 price-to-book ratio and 13.8 price-to-sales ratio are also hard to compare.

What’s not so hard to comprehend, though, is Franco-Nevada’s 1% dividend yield. Franco-Nevada increased its dividend by 25% in 2012, and has increased it for five consecutive years. That’s sure to keep income-oriented investors interested, which promises a sort of a price floor or support for the rest of us.

Business Model

As stated in the introductory paragraph to this analysis, Franco-Nevada has a unique business model that puts it somewhere between a gold miner and a gold ETF. Compared to the latter, Franco-Nevada is a more leveraged play on gold – which, of course, can work both ways. It also pays a bigger dividend. When compared to gold miners, the biggest difference is that Franco-Nevada has zero capital costs, operating costs, or environmental costs – but it’s still a leveraged play on gold. If this seems “to good to be true,” just consider that Franco-Nevada has greatly outperformed both gold and gold-mining stocks since the end of 2007.

Franco-Nevada is a “double hedge” against inflation, too, as it not only serves as a hedge the same way all gold-related investments do, but since it doesn’t operate its own mines, it also avoids the ever-rising costs of doing so.

Technicals

Franco-Nevada’s business model is very appealing, and its balance sheet is basically flawless. However, its financials, as a whole, are mixed, and its valuation is difficult to peg, given the uniqueness of its business model. The company's dividend is nice and easy to appreciate, but its technicals are equally easy to understand while not-so-nice.

On June 28, Franco-Nevada sold off to $43.36 and caught double-support at its 50-day moving average line and bottom Bollinger band. From there, it surged to as high as $48.63 on July 5 – a new 52-week high. Now, seriously, what is a gold-related stock doing hitting a 52-week high in this market? I don’t know, and neither did traders, as Franco-Nevada has been trending lower since, and appears poised to return to that bottom Bollinger band. There, perhaps it will find support and reenter bullish mode. But until then, it looks to me like Franco-Nevada is not a great buy.

This is what we've been saying at Silver Monthly for quite some time now; and that doubles for silver, as well.

Now, when a talking head comes on a financial-news show to voice the opinion that gold and silver are not good investments, at least nine times out of ten, it's because he is a fiat-money-loving regimist completely oblivious to America's (and the rest of the world's) real fiscal and monetary problems. This is not the case, however, with Tom Kee of StockTradersDaily.

"Clearly, we have printed so much money in the past. It's ridiculous. Our economy is only surviving, it seems, because we've printed so much money," says Kee. Nevertheless, Kee believes that gold and silver are still likely to fall.

Why? He says that the very fact that gold and silver haven't gone through the roof is evidence that no further monetary stimulus is in the pipeline.

The market, in the aggregate, is a great prognosticator, because when you add up everyone's self-interested predictions, their accuracy can be stunning. In his 2004 book, The Wisdom of Crowds, author James Surowiecki studied this phenomenon, pointing out that when a group guesses the number of jelly beans in a jar, their average guess is invariably much closer to the correct answer than the vast majority of the individual guesses. InTrade, which takes bets on the outcome of political contests, is almost always right. Thus, the fact that people aren't buying gold and silver is strong evidence that monetary inflation is under control.

Time to Face Reality?

"We're looking at higher taxes, we're looking at lower spending," says Kee. Reality is hitting home. We can't keep inflating forever.

In a recent interview with Maria Bartiromo, Alan Greenspan -- architect of the Great Recession -- was asked if he agreed with Dallas Fed president Richard Fischer that monetary policy could not solve the nation's financial problems. He laughed at the absurdity of the question. Clearly, printing money cannot solve anything -- at best, it is only a temporary measure, and even Greenspan acknowledges that. But talking heads like Bartiromo rarely do, and even they are more educated than the vast majority of U.S. and global policy-makers.

Irrational Crowds

Markets are great predictors because, in the aggregate, even stupid people are smart. However, there are also deeply held beliefs that, when they dominate a culture, can ensure its downfall. For instance, the Aztecs irrationally thought the Spanish invaders were their prophesied gods. Their whole society was based around a false religion, with beliefs so deeply ingrained that they caused a great culture to submit to slavery without a fight. Beliefs in the inevitability of statism and the enduring supremacy of the dollar are similarly held by Americans -- even smart ones with fat trading accounts.

In his June 3, 2012 article How to Make Money in the Stock Market, Alexander Green of the Oxford Club acknowledges that the EuroZone is a mess, and that that mess could easily spill over into the U.S. However, Green also states -- correctly -- that everyone knows this, and thus, it is already discounted in stock prices. No one really knows how that or any other mess will play out, and people who think they do aren't smart enough to manage their own money. This echoes Mark Twain's classic sentiment that, "It ain't what you don't know that's the problem, it's what you think you know that just ain't so." However, again, this presumes that people aren't holding onto irrational and superstitious beliefs in the U.S. state and its fiat currency -- and they are.

The Problem With Timing the Gold Market

"When gold starts to increase for no apparent reason, then maybe we can say that a stimulus program is down the road, relatively soon," says Kee, but I think that will be too late. Gold and silver may soar by double digits without warning. This might lead to a run on precious metals which could send their prices skyrocketing by several hundred percent in a matter of days or weeks. How much lower can gold and silver really go? As always, now still seems to be a good time to buy, despite Kee's reasoned analysis.

Bearish Alternatives to Gold and Silver

However, if you believe that Kee has a point, he does offer some other ideas of where to put your money. Kee says that stocks are likely to decline with gold and silver, since it has only been stimulus dollars that have propped up the market. Thus, he suggests shorting the market when it reaches its relative highs.

Another suggestion is to go long the VIX, which is a measure of market volatility. There are several ETFs that allow you to play the VIX: VXX for short-term volatility, VXZ for mid-term volatility, and TVIX for a double-leveraged play on short-term volatility.

Collapses Happen Fast

But the bottom line here, which is something that both Tom Kee and Alexander Green miss, is that collapses can happen very quickly. Ludwig von Mises predicted the inevitable fall of the Soviet Union and Communism in general back in the 1920s. He didn't say when it would fall, only that it definitely would. And when the Soviet Union did collapse, it happened fast and with little warning. The same could happen for the increasingly socialistic United States. And when it does fall, would you rather be holding paper claims on a market volatility index, or gold and silver?

On July 4, 1776, the people of the thirteen American colonies declared their independence from the British Empire. Drafted in exquisite prose by the proto-libertarian Thomas Jefferson, the Declaration listed numerous grievances against King George. Among them were:

•    Maintaining a standing army.
•    Cutting off trade with the rest of the world.
•    Imposing taxes without the consent of the taxed.
•    Depriving people their right to trial by jury.

For these and other reasons, the people of the thirteen colonies issued a formal pronouncement of secession from the British Empire. Now every July 4, we celebrate that secession, even as most modern Americans repudiate the true spirit of Independence.

For instance, most Americans think it’s entirely unreasonable and dangerously unpatriotic to oppose the maintenance of a standing army. Yet, this was one of the reasons for America’s secession, and Thomas Jefferson himself once said that central banks were as great of a threat to liberty as standing armies – today we have both, and few people care. They do love their fireworks, though.

In 1776, Americans were outraged that their government would cut off trade between them and the rest of the world. Today, most Americans beg their government to do this for them, since they are uneducated on economics and think free trade is bad, and they’re simultaneously too childlike to simply not buy goods made in China or Mexico or whatever countries they think are “stealing our jobs” – a communistic notion at that, since jobs are not property, and even if they were, they wouldn’t be “ours.”

Americans today might gripe about taxes, but most pay them willingly. If there was ever a serious effort on the part of the American people to resist the IRS, that institution would crumble and take the state with it. But of course, the majority of Americans today are net beneficiaries of the confiscatory tax system, and thus they are in favor of imposing taxes without the consent of the taxed. Declaration be damned.

Americans today can be arrested and jailed indefinitely without trial. Do they care? Not for the most part. They’re more interested in watching the big game, drinking beer, and lighting firecrackers. To them, this isn’t just what America has become, it’s what America has always been. If it was ever anything else, they don’t want to know about it. Nascar is on!

The Declaration of Independence was written in 1776. The Constitution wasn’t ratified until 1789. In between, there were thirteen glorious years of comparative freedom and anarchy – the best America has ever had. These “lost years” are neglected by government-school textbooks. If you asked college-educated people what year the Constitution was ratified, I’m confident that 1776 would be the most popular answer. But the Constitution was, in fact, a counterrevolutionary document, intended to create a strong central government to supersede the loose confederation of thirteen states. Most Americans do not appreciate this tremendous difference between the Declaration and the Constitution.

Wrapped up in this snake’s mating ball of faux-patriotism is the odious Pledge of Allegiance, which was written by a self-identified socialist in the years immediately following the so-called Civil War. The words, “one nation, indivisible,” was intended as a blow against the traditional right of political secession – what the American revolutionaries did in 1776! Following the War to Prevent Southern Independence, America became “one nation, indivisible” in the sense that the voluntary union formed by the Declaration of Independence and bolstered by the Articles of Confederation was no longer voluntary. The Pledge not only affirms this, but was an overt attempt to instill obedience to the government on the part of school children. This is another thing in direct conflict with the spirit of 1776. (By the way, “under God” wasn’t added to the Pledge until 1954 – so much for that “tradition”).

The Founding Fathers were not a monolithic group. There were factions, each of which had their good and their bad, and even champions of liberty like Thomas Jefferson were tragically flawed – do we even need to mention the reprehensible institution of human slavery? There, we did. But the point is that what the Founders stood for and what we have today are vastly different. The Founders rebelled against a government far less domineering than the one we’re made to live under today. This fact is, of course, lost in the smoke of cheap fireworks every year, as Jefferson and his cohorts spin in their graves.

Week 1

The London Fix Market was closed on June 4 and 5 in observance of the Queen’s Diamond Jubilee. Stocks were mostly higher on these days, with the S&P 500 posting small gains on Monday, June 4 (+0.01%), and larger gains on Tuesday, June 5 (+0.57%). The Dow was mixed, losing 0.14% on Monday, and then gaining 0.22% on Tuesday. The Nasdaq was more reliable, posting consecutive gains of 0.46% and 0.66%. The dollar lost 0.73% against the euro on Monday, but then bounced back by 0.53% on Tuesday.

When the London markets did reopen, silver made a huge surge to $29.36, up 7.23% from its previous close. Gold was up 1.81%, too, as the dollar lost a whopping 0.92% against the euro, closing at 0.7951 euros to the $1. Stocks were up big: the S&P 500 gained 2.3%, the Dow gained 2.37%, and the Nasdaq gained 2.4%.

Gold and silver both posted losses on Thursday and Friday, with gold ultimately closing at $1,576.50, down 1.84% for the week, while silver finished at $28.17, up 2.89% for the week. Stocks outperformed precious metals, with the S&P, Dow, and Nasdaq posting respective gains of 3.73%, 3.59%, and 4.04% for the week. The dollar, despite gaining on the euro on Thursday and Friday, finished the week down 0.66% against the failing EuroZone currency.

Week 2

Stocks continued to rally Week 2, despite big losses on Monday. On that day, the S&P, Dow, and Nasdaq posted respective losses of 1.26%, 1.14%, and 1.7%, while gold gained 0.48% and silver was up 1.63%. For the week, though, stocks and precious metals all gained, while the dollar fell 0.97% against the euro – including four consecutive days of losses, Tuesday through Friday. The S&P 500 finished the week at 1,342.84, up 1.3% for the week. The Dow closed at 12,767.17, up 1.7% for the week. The Nasdaq finished at 2,872.8, up 0.5% for the week. Gold closed Friday at $1,627.25, up 0.85% for the week, and silver finished at $28.66, up 1.74% for the week.

Week 3

Whenever the Nasdaq trails the Dow, it is seen as a bearish sign. In Week 2, both indices posted gains, but the Dow’s 1.7% was much greater than the Nasdaq’s 0.5%. Savvy readers of the tape could have predicted a pull back in equity prices, as the S&P 500 lost 0.58% for the week, while the Dow lost 0.99%. Ironically, the Nasdaq posted a gain of 0.68% for the week, with four up days and only one day in the red. Meanwhile, gold and silver were both down four of five days, and finished the week down 3.79% and 6.45%, respectively. The dollar lost ground against the euro three of five trading days, but still finished up 0.33% for the week.

Week 4

Stocks were down in a big way on Monday, losing 1.6% (S&P 500), 1.09% (Dow), and 1.95% (Nasdaq). On Tuesday and Wednesday, stocks were up across the board, posting gains of 0.48% and 0.9% (S&P), 0.26% and 0.74% (Dow), and 0.63% and 0.74% (Nasdaq). Gold, meanwhile, was up both Monday and Tuesday (0.29% and 0.38%), before pulling back a bit (-0.16%) on Wednesday. Silver was more volatile, posting a 0.34% loss on Monday, followed by a huge 2.69% gain on Tuesday. Silver then gave back most of those gains by losing 2.2% on Wednesday. The dollar was up 0.34% on Monday, down 0.65% on Tuesday, and then relatively flat on Wednesday, losing a tiny 0.02%.

Thursday was a day that will live in infamy for as long as the United States shall stand. Siding with the liberal, Democratic-appointed justices, Chief Justice John Roberts – a George W. Bush appointee – upheld the constitutionality of the individual mandate aspect of ObamaCare. This ruling basically affirmed the federal government’s unlimited power to force people to do anything, or prohibit them from doing anything, so long as the mandates are phrased in the language of taxation.

In the wake of this historic decision, stocks tanked, but after the mid-day sell-off, insurance and Big Pharma stocks surged, lifting the entire market – what does this say about ObamaCare and who it’s really good for? At the end of the day, the S&P 500 was down 0.21%, the Dow was down 0.2%, and the Nasdaq was down 0.9%. Gold fell 0.95%, and silver was down three cents to $26.81. Inexplicably, the dollar gained for the fourth straight day, closing at 0.8037 euros.

Then on Friday, stocks skyrocketed as Wall Street plutocrats recognized the truth about ObamaCare. The S&P 500 was up by 2.49%, the Dow was up by 2.2%, and the Nasdaq gained an amazing 3.3%. Gold also surged by 2.49%, and silver gained 2.35% to close around $27.44. Meanwhile, the dollar absolutely crashed, losing 1.74% against the euro – the euro! -- and closing at 0.7898 euros.

Conclusion

For the month, stocks were up across the board. The S&P 500 gained 3.96%, the Dow was up 3.93%, and the Nasdaq was up 3.81%. Gold gained 2.52%, but still closed out its worst quarter in eight years. Silver lost ground again – 2.35% – although it kept pace with the hapless dollar, which fell 2.36% against the not-as-hapless euro. Here’s a prediction you can take to the bank: One of these months, silver will absolutely skyrocket. The dollar won’t.

This is the third in a series of articles analyzing the current status of gold stocks. Earlier this year, Silver Monthly analyzed several silver stocks, and we reviewed some common investment concepts in our first analysis of Silver Wheaton. To brush up on some terminology, go to that article. Otherwise, continue reading.

Financials

In 2011, Agnico Eagle Mines reported a net loss of $568.9 million. This was its first net loss since 2003, and beginning in 2004, Agnico Eagle reported successive annual earnings of $47.88 million, $36.99 million, $161.34 million, $139.35 million, $73.17 million, $86.54 million, and $332.17 million in 2010, before that $568.9 million loss in 2011. As you can see, Agnico Eagle’s earnings have been uneven, but have generally been on the upswing prior to last year’s loss. But earnings are expected to fall again in 2012, with Agnico projected to post another loss.

Last quarter, Agnico Eagle beat earnings expectations by 59.5%, growing EPS by 34%. Over the past three quarters, it has grown earnings per share at an average pace of 14%. But for the current quarter – the results of which will be announced on July 27 -- Agnico is expected to see EPS fall by 27%, which is worse than originally expected.

Sales were up 13% last quarter, and have been growing at an average rate of 90% over each of the past three years – that’s nearly double every year. Total revenue came in at $1.82 billion in 2011, up from $1.42 billion in 2010, $640 billion in 2009, and $380.66 billion in 2008. Sales are projected to increase in 2012, but not by a whole lot.

Why is Agnico seeing earnings fall even as sales are on the rise? It’s because it has gone from a one-mine company to a six-mine company very quickly – some might say too quickly. Agnico still has a pretax profit margin of 28.3%, but it can’t post positive earnings due to its massive operating expenses. In 2008, this number came in at just $11.5 million, whereas in 2011, it was $1.29 billion! Long-term, things may work out for Agnico, but in the short term, its income statement is a mess.

Business Model

Agnico Eagle avoids political risk by mining in North America and Finland, while its competitors are in geopolitical hotspots in Africa, the Middle East, and South America. That’s all well and good, but what’s not so hot is the fact that Agnico’s new mines have much higher production costs than its original flagship mine, LaRonde. This is why Agnico’s profits have been squeezed out of existence and the company is almost definitely going to post a second consecutive year in the red for the first time ever. And while Arctic Canada doesn’t have much in terms of political risks, there are extreme challenges associated with the remoteness and bone-chilling temperatures, which are leading to lower-than-expected gold production.

Valuation

Since Agnico Eagle has negative earnings, it has a negative P/E ratio, which makes it difficult to evaluate on those grounds. Across all other valuation metrics, though, Agnico Eagle is trading at a premium valuation. Its price-to-book ratio is 2.1, compared to an industry average of 1.6. Its price-to-sales ratio is 3.6, compared to an industry average of 3.4. Its price-to-cash flow ratio of 10.0 also compares negatively to the industry average of 9.7. Now, these aren’t hugely overvalued numbers, but when the company isn’t even producing positive earnings, shouldn’t it be trading at a discount to its peers, and not a premium? I sure think so!

Technicals

On May 15, Agnico Eagle fell below its 50-day moving average and looked to be headed lower. However, it shot back up the following day, and then went into a bullish trend. On June 19, the stock basically hit its upper Bollinger band and, predictably, has been heading lower since. It also saw its fast moving average fall below its MACD indicator line last week, which is another bearish sign.

Conclusion

This is another stock where the cons clearly outweigh the pros. Agnico Eagle’s income statement is a mess, its valuation metrics are unattractive, and its technicals don’t look good either. If you want to buy a gold stock, look elsewhere – at least for the time being.

This is the second in a series of articles analyzing the current status of gold stocks. Earlier this year, Silver Monthly analyzed several silver stocks, and we reviewed some common investment concepts in our first analysis of Silver Wheaton. To brush up on some terminology, go to that article. Otherwise, continue reading.

Management

Graham Briggs (pictured) is Harmony's CEO. He's also a member of the firm's board of directors. Briggs is a geologist by profession and was previously the managing director of Harmony Australia. Briggs joined Harmony in 1995 as a business manager. In 2011, Briggs received total compensation of around $1.5 million, which is in line with industry averages.

Patrice Motsepe is the chairman of Harmony's board of directors. Motsepe is not an independent director, but Harmony has established a "lead independent director," which is seen as good for investors. One board policy that is not-so investor-friendly, though, is Harmony Gold's program of voluntary affirmative action. The firm takes race and gender into account when appointing members to its board of directors, rather than choosing the most qualified candidate. This is not in investors' best interest, regardless of their race or gender.

Financials

As stated above, Harmony Gold Mining ends its fiscal year on June 30, and for fiscal 2011, it reported net income of $86 million on sales of $1.78 billion. Both numbers are up from 2010’s results of a $24 million loss on sales of $1.49 billion. In fact, Harmony Gold has posted losses in three of the past five years, with losses of $295 million in 2007 and $30 million in 2008 to go along with that $24 million loss from 2010. Harmony did have a standout year in 2009, though, earning more than $310 million. Sales have fluctuated, but mostly gone higher, starting with $1.35 billion in 2007, followed by successive results of $1.27 billion, $1.28 billion, $1.49 billion, and finally $1.78 billion in 2011.

Harmony Gold’s fiscal year will end on Saturday, but it won’t post Q-4 and annual results until August 14. Last quarter, Harmony beat earnings expectations by 4%, growing EPS at an annual pace of 73%, and bringing its three-quarter average for EPS growth to 83%. Estimates for the current quarter were revised lower, but they’re still expected to be up by a whopping 475%! Sales, however, were only up 3% last quarter, compared to a 15% three-year average for sales growth.

Harmony's balance sheet is not the strongest, and it has a pretax profit margin of just 4.9%. In all, its financials are less than encouraging, despite the promise of year-over-year EPS growth for the current quarter.

Valuation

Harmony Gold is a mixed bag from a valuation perspective. Its price-to-earnings ratio is high at 50.8, compared to an industry average of 23.4, but it doesn’t look so bad compared to Harmony’s own five-year average of 70.8. Harmony’s price-to-book ratio of 0.9 means that the stock is trading at a 10% discount to its net-asset value, and at barely half of the industry average of 1.6 times book value, but its price-to-cash flow ratio of 12.2 is quite a bit higher than the industry average of 9.7. Harmony’s price-to-sales ratio, though, is just 2.3, compared to industry and five-year averages of 3.4 and 3.1, respectively. Finally, Harmony pays a 1.4% dividend, which isn’t bad, but is less than the industry average of 1.6%.

Technicals

As of Monday’s close, Harmony’s $9.72 share price is just under its 50-day Moving Average line, which should serve as resistance. It would be wise to wait for Harmony to break through this barrier before entering the stock. I could definitely see Harmony being pushed below its bottom Bollinger, too, which would be bearish; and it saw its fast moving average fall below its MACD indicator line on Thursday, June 21, which is another bearish sign. Harmony’s MFI looks mildly bearish, while its Williams %R looks mildly bullish – these two indicators are thus a wash.

Conclusion

Although gold companies tend to be countercyclical and a good hedge against inflation risk, gold stocks are not as good for these purposes as physical gold is. What’s more, the stock market has been in bearish mode for a while, even as gold has fallen. Inflation? People are too worried about the euro to notice what’s going on with the U.S. dollar as it relates to anything other than the failing European currency, at least in the short term. And as far as the short term goes, Harmony’s technicals look terrible.

Harmony’s per-ounce mining costs are much higher than the industry average, and thus, with gold prices down, so is Harmony’s profitability. Most of Harmony’s political exposure is in South Africa, where miners unionized. In summation, there are much better plays on gold than Harmony, even if you want to buy a gold stock instead of physical gold. Gold ETFs, for example, allow you to avoid company-specific risk – of which Harmony has a lot.

This is the first in a series of articles analyzing the current status of gold stocks. Earlier this year, Silver Monthly analyzed several silver stocks, and we reviewed some common investment concepts in our first analysis of Silver Wheaton. To brush up on some terminology, go to that article. Otherwise, continue reading.

Financials

In 2011, Barrick Gold Corporation reported net income of $4.54 billion. This was up from $3.18 billion in 2010. In 2009, Barrick reported a net loss of $4.37 billion! Over the past three years, Barrick has seen its earnings per share increase by an average pace of 48% per year.

Sales came in at $14.31 billion in 2011, up from $10.92 billion in 2010 and $8.14 billion in 2009. Barrick’s three-year sales growth has averaged 28% per year.

Last quarter, Barrick fell short of earnings expectations, just missing estimates by 1.8%, with EPS still growing by 8%, year-over-year. Over the past three quarters, Barrick has averaged year-over-year EPS growth of 26%, but estimates for the current quarter – the results of which will be announced on July 28 – were revised down to -7%. Sales were up 18% last quarter.

Barrick is projected to see its earnings per share increase by 1.28% for 2012, but coming off a three-year average of 48%, this is a severe deceleration of earnings growth. On the positive side, Barrick’s balance sheet is the strongest in the gold-mining industry, with just $0.56 in debt for every $1 in equity, and its pre-tax profit margin of 48.9% is huge. Barrick earns a 21.8% return on equity for its investors, too.

Valuation

Although Barrick’s deceleration of growth is troubling, its valuation metrics are those of a rather grossly undervalued stock. Barrick’s trailing P/E of 8.9 is well under the industry average of 24.9, as well as Barrick’s own five-year average of 18.6. Its price-to-book ratio of 1.7 is right in line with the industry average, but much lower than its own five-year average of 2.3. Barrick’s price-to-sales ratio of 2.7 is well under the industry and five-year averages of 3.7 and 4.4, respectively. In terms of price-to-cash flow, Barrick’s 7.8 multiple is 25% lower than the industry average of 10.4. And Barrick now pays a 1.5% dividend, which is right in line with the industry average and 50% higher than its historical average of 1%.

Yes, Barrick’s growth is decelerating, but on a forward basis, its P/E is still an ultra-low 6.8. And when adjusted for growth, this gives Barrick Gold a PEG of 0.7. What this means is that the stock could gain more than 42% and still be trading at a PEG of 1.0, which is still bargain-stock territory.

Technical Analysis

On February 2, Barrick Gold closed at $49.83. From there, it fell to as low as $34.82 on May 6, a decline of more than 30% in just three-and-a-half months. This, of course, coincides with gold’s decline. However, after bottoming out, Barrick shot to as high as $43.30 on June 6, piercing its upper Bollinger band in a failed breakout attempt, before pulling back. Then on June 15, Barrick once again pierced its 50-day Moving Average line, and now it has that line to rely on for support. As of June 20’s $40.32 close, Barrick was trading at 2.56% above its 50-day M.A., and its chart looks bullish with Bollinger bands that are beginning to ascend. With the stock still 27.9% off its 52-week high, Barick has plenty of room to run, and with gold well off its recent highs, a big surge by Barrick is probably more likely than not.

In the short-term, now looks like a good time to get into Barrick. Its fast-moving average line pierced its MACD indicator line last Friday (June 15), and since then, the stock has already notched 2% in gains. Its Williams %R and MFI are still well outside the overbought zones, although the stock does have a very low short ratio.

Further Analysis

One unique thing about Barrick is its lack of presence in Africa. Africa is the most gold-rich continent on the planet, and most gold-miners have a significant presence there. But Barrick’s strategy calls for a minimization of political risk, and with Africa politically unstable, Barrick has concentrated its operations elsewhere. This is advantageous for Barrick and its investors. On the flip side, this puts Barrick out of the race for lowest-cost gold producer. With Barrick, you’re getting a safer, more reliable miner, but the margins aren’t going to be as spectacular as the riskier gold miners when times are good.

This conservative approach led Barrick to hedge against gold prices for most of its history. With gold on a huge bull run for most of the past decade, this led Barrick to be among the least attractive of gold miners, and as a result, the firm spent $5.2 billion in 2009 to eliminate hedges on 9.5 million ounces of gold. Now that gold prices have been on the decline, the wisdom of this de-hedging – or at least the timing of it – is questionable.

Conclusion

As an ultra-short term play, Barrick looks good based on its chart. As a more intermediate term play, the deceleration of growth is troubling. As a longer-term play, those valuation metrics make it look like a better buy. Perhaps a wise course of action would be to enter Barrick as a short-term play, aiming for gains of 10-12%, while setting an 8% stop-loss. Then, after selling for a profit, wait for the stock to come back a bit before entering it as a long-term play.