As Gold Goes Bear, Is the Better Play In Mining?
As gold prices declined for the sixth straight session Thursday and officially entered a bear market, “Fast Money” pros look to where it’s headed next.
“If we close around $1,520, for example, I would take the momentum, get short, look for some support around $1,480,” Rich Ilczyszyn, founder of iiTrader.com, said Thursday.
Ilczyszyn said he wasn’t married to any trade and believed opportunities existed on either side of the trade. He also took issue with predictions that gold had hit a long-term high or low.
“Gold wears many different hats It’s not just an anti-currency, it’s not just a commodity, it’s not just safe haven. There’s a lot of things you have to take a look at,” he said. “I think if you’re discounting gold and saying that the absolute top is in, you’re wrong. The trend’s still intact in my view.”
U.S. spot gold traded around $1,535 midday, down 1.2 percent. Gold futures were slightly lower and shares of the SPDR Gold Trust were in the $149 range.
Are Gold Miners the Better Play?
Shares in gold mining companies were a strong bet, said John Hathaway, portfolio manager at Tocqueville Asset Management, where he runs the Tocqueville Gold Fund.
“The companies are very profitable, they’re raising their dividends and I think we’re putting a low in the metal here, otherwise the media wouldn’t be so interested,” he said.
“I think the conditions that got gold to $1,900 this summer haven’t gone away. It’s just that the metal was overcrowded with too many momentum players, and I think they’ve all been shaken out.”
Hathaway said there was no downside in gold, noting that gold was up 8 percent year over year.
Additional opportunities lie in smaller mining companies whose stocks have taken a hit, he said.
Hathaway also said it was a mistake to predict what gold would do based on charts, citing low trading volume for added volatility.
“You have to take a look at what is it that drives money into gold. Basically, it’s negative interest rates, financial repression, lack of fiscal discipline and money printing,” he said.
“I don’t think what gold is doing in these last two weeks are something you can take too seriously. Let’s see what happens next year.”
The top 5 holdings in the Tocqueville Gold Fund were:
- Newmont Mining
- Osisko Mining
- Randgold Resources
- Silver Wheaton
Hathaway also said silver in a recession would be treated harshly by the market.
“Typically, if gold does well, silver usually catches up,” he added.
Asked what he’d prefer if offered an equal dollar amount of gold or silver, trader Brian Kelly said, “I would probably take the gold, put it in a safe and I’d buy Silver Wheaton because I don’t have to worry about the cost there. They simply just resell the silver.”
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Trader disclosure: On Dec. 29, 2011, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s "Fast Money" were owned by the "Fast Money" traders: Najarian is long AAPL call spreads; Najarian is long AKS call spreads; Najarian is long PNC call spreads; Najarian is long RIMM call spreads; Najarian is long DG call spreads; Najarian is long WHR call spreads; Najarian is long MOS call spreads; Najarian is long WFT call spreads; Najarian is long CIGX; Najarian is long CME; Najarian is long CBOE; Weiss owns AAPL; Weiss owns EUO; Weiss owns FXA; Weiss owns QCOM; Weiss owns KO; Weiss owns AMLP; Weiss owns NS; Weiss owns NIHD;
Shelter Harbor Capital is long IWM
Shelter Harbor Capital is long KRE
Shelter Harbor Capital is short UTX
Shelter Harbor Capital is short Yen
Shelter Harbor Capital is short Pound
Shelter Harbor Capital is short Eurostoxx
Hathaway owns TGLDX