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Bear of the Day: Gold Fields (GFI)

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Are you ready for the bear case for gold and gold mining stocks? While I would love to pick on all the gold-digging dreamers, I found that only two companies in the industry group had a Zacks #5 Rank (Strong Sell) as I write this on Sunday evening: AngloGold Ashanti (AU - Free Report) and Gold Fields Limited (GFI - Free Report) .

I went with GFI as the headliner, but it could just as easily have been AU.

Why? Because as you might imagine, since the price of spot gold retreated from new all-time highs above $2,000 hit last August, the earnings momentum of many gold miners also fell back.

And many analyst projections for the diggers into 2022 are looking for a decline in revenues and profits, almost as if their forecast for the price of gold doesn't include a magical trip to $3,000 -- can you imagine?!

Here are 4 important messages I have for gold bulls and their disciples...

1) Yes, the gold miners can and will rally with the yellow metal in big swings over many months. And so there are many great trading opportunities to be had when you catch those momentum swings where the miners catch the tailwinds of the barbarous relic.

But take a look at some monthly charts so you can see that while spot gold just made new ATH (against 2011's $1,900), a LOT of the miners did not make new highs. GFI and AU are prime examples, where their share prices met major resistance at sub-2011 levels near $14 and $34, respectively.

In fact, AU was massively shy of its 2011 highs near $50. Why is that?

Is it because some miners are "over-hedged" where they sold too many forward contracts locking in a lower price for the sale of their gold than we are now seeing?

Yes, this is true for many who are tied to the heavy yellow metal in a rushing river of prospectors.

But there might be other factors keeping the diggers down while the relic rallies. Let's keep exploring...

2) Gold bulls may remember my interview with Maria Bartiromo on CNBC in November of 2009 when gold spiked above $1,100 for the first time ever.

I had looked at gold as a purely monetary phenomenon during the initial stages of QE dollar inflation and concluded that gold could go to at least $2,000 on pure asset perception -- if several central banks and large investment funds viewed the yellow metal as a convertible monetary asset.

My view was based on the unprecedented bond buying from the Fed and how that might affect other central banks who saw their dollar holdings at risk of depreciation.

Over the next 18 months, gold did indeed work its way fairly quickly above $1,900. But then what happened?

What happened was that investors began finding that deflation was here to stay. In fact, Fed QE of zero rates and bond buying might actually be pushing on a string to get inflation to return.

Thus bonds and stocks became more valuable assets than gold. So now let's look at the super-attractor luster of stocks making gold look pale by comparison...

3) Software and Biotech are the New Gold to Clobber Inflation

I've been a gold bear for over 5 years. That means I missed the dramatic rallies in both the metal -- from $1,100 to $2,000 -- and the VanEck Gold Miners ETF (GDX - Free Report) from $14 to $44.

But I did not care the whole time as I wasn't actively short metals and miners the whole time. More importantly, I made 5-10X that gold move in Software and Biotech stocks.

In 2017, I wrote one of the most important research reports of my career that I called "The Technology Super Cycle." My goal was to explain why inflation was non-existant and productivity was "missing in action." My call to action was to buy two industries that were crushing inflation with massive productivity gains unseen in the official gov stats.

If you want a copy of that report just email and tell 'em Cooker sent you.

But I'll give you a quick summary now: I learned a long time ago that you beat inflation by simply having exposure to innovative technology disruptors like Square (SQ - Free Report) , NVIDIA (NVDA - Free Report) and The Trade Desk (TTD - Free Report) .

And exposure to innovative biotech/medtech disruptors like CRISPR Therapeutics (CRSP - Free Report) , Align Technology (ALGN - Free Report) , and Invitae (NVTA).

4) Gold is Doomed as an Asset Class: Strong words, I know. But hear me out.

You must have already imagined that the exponential power of Software and Biotech earnings power will always trounce the value of a heavy gold bar that you must store and/or transport.

Maybe you saw this vlog from me recently when PayPal made a YUGE statement about Bitcoin...

Digital Gold: PayPal, Square, and the Fed Send Bitcoin Soaring

Now, brace yourself. While #FinTech is a huge threat to gold as an asset class, consider the wild possibility that in the next ten years asteroid miners will find more gold than exists on the earth.

I considered that possibility here in this article and related podcasts from 2019...

Why Gold is Headed to Zero -- And What You Should Buy Instead

That's my take on gold and its diggers. Trade them if you can, but don't bank on them for long-term ways to beat inflation. They never will.

If you need to check your biases and feelings here -- as I always do with investing -- check out the fantastic 2016 film Gold with Matthew McConaughey. There you'll get a glimpse of the 1980s "yellow fever" that is no longer relevant in a digitally exponential world.

Disclosure: I own shares of NVDA, SQ, NVTA, SHOP, CRSP, EDIT, BIDU, and TTD -- but not GLD -- for various portfolios.

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