Gold prices were rising on the markets due to a decreasing U.S. dollar before retracing to the levels on Dec. 18. The bullion for immediate delivery gained 0.25% on the Hong Kong gold market to 8,865.00 Hong Kong dollars ($1,141.57)Â per ounce from the prior close of HK$8,841.36 per ounce.
Source: Kitco.com
On the London Bullion Market, gold closed at $1,137.60, up $6 per troy ounce (or 0.53%) from Dec. 16, when the bullion for immediate delivery closed at $1,131.60 per troy ounce.
Gold is also uptrending on the Comex. The financial contracts through which the precious metal is traded are currently at $1,143.25 per ounce, up $5.85 (or 0.51%) from the previous close.
This is the fourth jump in a row on the Comex, signalling the hard time is over. Gold is also reverting the trend on the market futures.
Gold futures were $1,127.80 per ounce of gold on Dec. 15, marking the 24th dip out of a total of 37 changes in the price of the futures since the beginning of November. Since then, the price has gained 1.4% or $15.45 per troy ounce.
However, one ounce of gold on the Comex is still below its average price computed over the last 37 trading days. The average price is $1,204.10, ranging from a low of $1,123.90 and a high of $1,318.60.
With gold starting to uptrend again, investors seeking to expose their portfolios to the precious metal through investments in gold stocks are looking for good buying opportunities.
One way to screen for gold stocks is through two ratios: the price-book ratio and the EV/Ebitda ratio.
Kinross Gold Corp. (KGC, Financial), Gold Fields (GFI, Financial), Harmony Gold Mining (HMY, Financial), Iamgold (IAG, Financial) and Yamana Gold (AUY, Financial) look to be the cheapest gold stocks since their price-book ratio and EV/Ebitda ratio are below the average.
Investors also look at the EVO (enterprise value over total ounces of gold reserves) metric. This metric is the value the stock market gives to each company's proven and probable reserves on an ounce-to-ounce basis.
When deciding which gold stock to invest in, it is wise to consider the EVO metric along with the beta gold, which measures the stock's exposure to changes in the price of gold.
The betas are computed according to a multifactor model run over the November 2015 to November 2016 period, comprising 253 daily observations on gold stocks, S&P 500 prices, the U.S. Dollar Index and U.S. 10-year bond yield data.
Disclosure: I have no positions in any stock mentioned in this article.
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