ZLC, KGJI, GBG: Fathoming George Soros’ Predicament With Gold

Dec 20, 2011 8:44:07 AM PST | 616 View(s) | No Comment(s) - Post a Comment Rating

Print Email

StockHQ:

GBG
$0.00 $0.00 0.00%
ZLC
$9.40 -$0.28 -2.89%
KGJI
$1.24 +$0.10 +8.77%

George Soros’ first major outing after going 75 per cent cash in July due to “baffling” market conditions turned out to be rather disappointing. The legendry investor recently placed a big bet in Chinese gold jewelry chain Chow Tai Fook’s initial public offering and well, lost the bet. The company name means fortune, prosperity and luck in Chinese but it did not bring any of these to Soros. The investor has, in the past, indicated that gold investing may be plateauing. However, Zale Corporation (NYSE: ZLC), Kingold Jewelry Inc (NASDAQ: KGJI) and Great Basin Gold Ltd (NYSE: GBG) are gold related small cap stocks which still make sense to stay put for medium term. Here is how:

Gold edged higher today on the back of positive news from Europe. This shows the appetite for gold investing has just subdued and not faded away completely. If the economic and political newsflow from the European countries maintain even slightest of the positive bend, gold prices stand to benefit in 2012. Although gold prices may stay weak for the rest of the year as trading volumes tend to dry up in the festive season. In January, however, “the rebound in the gold price could prompt some short-covering, and we could retest the 200-day moving average,” said BNP Paribas analyst Anne-Laure Tremblay. This is likely to have a cascading effect that will eventually help gold investing.

Zale Corporation (NYSE: ZLC), meanwhile, has continued its positive trend, gaining 8 per cent in the last week. Part of the gains is due to the fact that ZLC is a fairly diversified jewelry player and not focused on gold only. Even after a 12.5 per cent rise in the previous month, ZLC trades well below its book value of $5.4 per share.

Although Kingold Jewelry Inc (NASDAQ: KGJI) and Great Basin Gold Ltd (NYSE: GBG) remained down in the recent past, they have been finding strong support at key levels. KGJI trades with a gain of 3 per cent today while GBG is up more than 5 per cent indicating strong demand of these beaten down stocks. Before KGJI and GBG break these support levels, markets may well be swarmed with positive developments about Europe.

Nevertheless, investors in these stocks are not likely to see more value erosion as the prices are already rock bottom and the only logical way is up for these stocks. Of course, markets have the uncanny ability to surprise and so, we could see a surprise on the negative side but the downside will expectedly be limited.