Gold's Rally May Have Just Begun: Do these Mining Companies Stand to Benefit?

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(Written by Rebecca Lipman. List compiled by Eben Esterhuizen, CFA)

Gold recently experienced a correction from its peak of $1,900/oz. down to its current price of $1,676, but some analysts are saying gold prices will still rally higher.

According to Karim Rahemtulla of Wall Street Daily, “the real gold mania hasn’t even begun yet.”


“Last week, the United Kingdom added more liquidity to its economy – over $100 billion worth. In the coming weeks, the euro zone will do the same, while also lowering interest rates.” The world’s liquidity measures are weakening currencies, she argues, which adds more value to gold.

“Add in emerging market demand and a hedge against calamity, and you set the stage for a long and prosperous run.”

Gold price and gold stock shares aren’t necessarily connected. Gold has nearly quadrupled in price while gold shares have yet to return to early 2008 highs.

But if gold still has upside potential to price in, the current value presents an opportunity to buy in a discounted price. And what about gold shares – which companies stand to benefit most from a rally in gold prices?

According to Rahemtulla, it is gold mining stocks that have the most to gain.

However gold miners have unique problems too. Bloomberg recently reported that gold’s rally has made Columbia’s illegal gold mining trade “a lot more profitable” than cocaine production, providing a new source of funding to terrorist groups.

So, which gold miners are expected to see the biggest upside?

For ideas, we collected data on institutional money flows, and identified a list of gold mining stocks that have seen significant institutional buying during the current quarter.

Big money managers seem to think these mining stocks have a lot of potential–should any of these names be on your watch list?

Analyze These Ideas (Tools Will Open In A New Window)

1. Access a thorough description of all companies mentioned
2. Compare analyst ratings for all stocks mentioned below
3. Visualize annual returns for all stocks mentioned

List sorted by market cap.

1. Gold Resource Corp (GORO): Engages in the exploration for and production of gold, silver, precious metals, and base metals, including copper, lead, and zinc primarily in Mexico. Net institutional purchases in the current quarter at 5.8M shares, which represents about 18.18% of the company's float of 31.91M shares.

2. Banro Corporation (BAA): Engages in the acquisition, exploration, and development of gold properties in the Democratic Republic of the Congo (DRC). Net institutional purchases in the current quarter at 17.7M shares, which represents about 9.38% of the company's float of 188.64M shares.

3. Extorre Gold Mines Ltd. Ordinar (XG): Engages in the acquisition, exploration, and development of mineral properties in Argentina. Net institutional purchases in the current quarter at 9.8M shares, which represents about 11.49% of the company's float of 85.31M shares.

4. US Gold Corporation (UXG): Engages in the exploration for, development of, production, and sale of gold, silver, and other precious metals. Net institutional purchases in the current quarter at 6.5M shares, which represents about 6.03% of the company's float of 107.72M shares.

5. Claude Resources, Inc. (CGR): Engages in the acquisition, exploration, and development of precious metal properties, as well as production and marketing of minerals in Canada. Net institutional purchases in the current quarter at 12.8M shares, which represents about 7.85% of the company's float of 163.14M shares.

6. Vista Gold Corp. (VGZ): Engages in the evaluation, acquisition, exploration, and advancement of gold exploration and development projects in Australia, North America, and Indonesia. Net institutional purchases in the current quarter at 13.5M shares, which represents about 21.63% of the company's float of 62.40M shares.

7. Midway Gold Corp. (MDW): Engages in the acquisition, exploration, and development of mineral properties in North America. Net institutional purchases in the current quarter at 10.9M shares, which represents about 14.26% of the company's float of 76.44M shares.

8. Gold Reserve Inc. (GRZ): Engages in the acquisition, exploration, and development of mining projects. Net institutional purchases in the current quarter at 7.2M shares, which represents about 22.07% of the company's float of 32.62M shares. 



The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Investing Ideas , Commodities , Stocks


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