Newmont Mining

Gold Up Big: Stay With Newmont Mining

Yesterday, gold was up over $23 in trading, hitting a seven month high. A CPI report of 2.7% helped send gold flying.

The concern is that with energy and home prices having declined since the spring of 2006, that the CPI would be close to zero or even negative by now. Yesterday's data show there is still plenty of liquidity in the economy to keep it going and rate decreases are going to be pushed out for a while. The possibility of an increase or two exists if growth ticks up a bit too much.

We blogged in October about the merits of investing in Newmont Mining (NEM). Our rationale was the huge correction in its stock price and the discount it sold for relative to the value of its gold reserves. The value of its gold reserves are estimated to be 20% to 50% higher than its stock price.

Newmont reports earnings today, not that it really matters since it trades relative to the price of gold price. But it would be worth a listen.

There are a number of factors which favor the outlook for gold. Most countries have floating currencies or have their currencies backed by floating currencies. Central banking mistakes will lead to higher levels of inflation--and we know that central banks will make mistakes.

Newmont is a good hedge in a world of floating currencies and awash with cash.