Potential "Raid" for Gold Bugs

Another Active Ingredient in the "Raid" for Gold Bugs has Emerged

Newmont Mining Corp. (NEM - Analyst Report) announced a $1.2 billion stock and convertible debt offering. We think this is well-timed and the deal will get done due to the activity of gold bugs recently. Bravo, Newmont!

However, the "Raid" for gold bugs has several active ingredients in it now. It is getting potent, and could kill them off.

These ingredients are:

1) An increase in stock offerings - Both Newmont and Kinross Gold Corp. (KGC - Analyst Report) have announced sizable stock offerings in recent days. They are not dumb, and know when the gold market and their stocks have peaked.
2) Slowdown in the Indian economy - GDP growth has slowed from 9% to 5% (and falling) in India. Nearly 45-50% of world production is consumed in India. That's right folks -- not the US, Japan, Europe or China -- but India. Gold is a luxury item in this rapidly slowing economy, and the slowing is most rapid in large cities where gold is consumed the most.
3) Gold has no value and has spiked recently - It is just another metal like copper and lead. Its luster is in name only. It is economically sensitive. Most, if not all, other commodities have collapsed in recent months. Gold historically has correlated with oil, which has collapsed as we all know.
4) A slow growth, low inflation, strengthening USD  and low interest-rate environment - This is the worst-case scenario for the gold market. Most of this is happening now. Central banks will take interest rates worldwide to zero. The USD will strengthen due to its safe haven status and rising confidence in President Obama. Inflation is non-existent. Worldwide GDP growth is low, but not negative.
5) Central banks - They need to finance deficits and bailouts by selling gold.
6) The amount of gold mined could increase with high prices - There is incentive to mine gold. Cash costs are in the $400/oz. range with prices near $1000/oz.

Overall, these "Raid" ingredients should be a stiff warning to the gold bugs. Be careful or you may be seriously injured. I don't want to see you hurt too badly.

Read the full analyst report on NEM

Read the full analyst report on KGC