Monday, September 5, 2011

Golden Opportunity?


The price chart of gold (see earlier post) has gone 'hyperbolic', a sign that suggests we're in one of those feared 'bubble markets'. You may suspect that the gold price is not in a bubble but rather that the U.S. dollar is in free-fall. However, many major investors seem now to have reached the conclusion that the devaluation of the U.S. dollar is overdone and that in spite of everything, compared to other parts of the world the U.S. is a safe haven. Many market analysts and investors have noted that the price of gold has risen dramatically but not so the price of gold producers. Here lies an opportunity.

Furthermore, the demand of a growing world population for ever increasing amounts of food have made companies such as Potash ,which mine key ingredients for fertilizer, look very attractive while the scared markets have only in part recognized their value. Finally, commodity demand will increase as long as BRIC countries keep on growing their economies. Yes China and India maybe fighting inflation, but their economies still grow between 6 and 10% annually.


Canada is sitting in a sweet spot, but we're not all experts in all those different industries. So here may be a hedge against sluggish North American economic growth, invest in an ETF that holds all the stuff mentioned above: iShares S&P/TSX Capped Materials Index Fund or XMA. Below are the top holdings.

Holding
% of Fund
BARRICK GOLD CORP.
14.11%
POTASH CORP. OF SASKATCHEWAN INC.
13.37%
GOLDCORP INC.
11.67%
TECK RESOURCES LTD.
5.48%
KINROSS GOLD CORP.
5.35%
SILVER WHEATON CORP.
3.84%
AGRIUM INC.
3.67%
YAMANA GOLD INC.
3.36%
AGNICO-EAGLE MINES LTD.
3.22%
ELDORADO GOLD CORP.
3.06%
Total:67.13%

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