The TSX Gold Index bottomed out at 352 June 16 and has risen 23% over 55 sessions since then. The Venture Exchange, meanwhile, is down 4% since that time, so clearly the producers are more in favor at the moment. However, in this kind of Gold environment, some select juniors are doing extremely well and will continue to do so. Going forward, we’re expecting a wave of mergers, takeovers and property purchases in this industry as cash-rich small, medium and large producers scramble to find ways to increase their production profiles. We’re in for some exciting times.
An important factor holding back the share prices of many producers over the last few years has been escalating costs due in large part to high oil prices – energy is such a significant part of the cost structure for these companies. With oil prices down sharply due to a slowdown in economic growth in North America and Europe, and Gold going in the other direction, the earnings outlook for producers has turned extremely bullish. It’s essential in our view to have exposure in one’s portfolio right now to some of the best producers (small, medium or large) and accumulation on any weakness in these stocks makes sense.
The TSX Gold Index has the potential to post some spectacular gains in the coming months. John updates the chart below.
