Yamana Gold Rush Quiets Down

Yamana Gold Inc. (USA)  (Public, NYSE:AUY) stock has come back down to prices we haven't seen since January.  The cover has been blown, every speculator in the world bought gold, crude oil, grains, coffee, sugar and cocoa.  Its appears the party is over, but with looming recession, Fed rate easing, a weakening dollar, rising oil prices and an uneasy world economy -- should you really count gold out?

Fellow Masters, gold prices appear to be firmly supported in the months ahead and if they fall more, good for us.  On March 14th analysts at RBC Capital Markets maintained their "sector perform" rating on Yamana Gold . They raised their target price from $19 to $21. RBC said that after gold reached an all-time high of $1,000/oz , Yamana Gold is among the most liquid companies among the Tier II gold producers. The upward revision in the target price reflects increased stock multiples, so party on Wayne. 

Gold prices came down this week and suppose they continue to fall, what good is investing in AUY? 

Canada's Yamana Gold Inc said earlier this month they will consider hiking its dividend in the third quarter of 2008 as it reaps the benefits of record high gold and silver prices. The CEO said: "By the third quarter, we will seriously have to look at what we do with that available cash and part of it will be looking at an increase in the dividend," Peter Marrone told the Reuters Global Mining Summit in London on March 11th.

A comparable yield for Yamana would equate to around 4 cents a share per quarter, up from 1 cent at present, he added.

A higher dividend would be "good financial discipline" and would also attract yield investors -- a pool of capital around 10 times the size that focused specifically on gold miners.

The increase in gold prices has been out of control, but so has the instability of the U.S. and World stock markets.  The storm is not over yet, and that story is told to us again and again on the news and in the business column we read everyday.  So if we are not out of the woods yet -- gold makes sense.

Masters, let's keep an eye on AUY this week, if it falls below $15 -- it's a Buy.

I'll close with some commentary from Larry Edelson in Real Wealth that was made at the start of the month:

"I've been saying for a long time that gold could hit $1,000. Many called me crazy. Now, all of the market fundamentals - from the beleaguered U.S. economy that faces imminent inflation spikes to a battered dollar and global economic uncertainty – point to gold taking off to well above $1,000 an ounce.

"This is great news for our the gold positions in your portfolio, including our newest recommendation, Yamana Gold. Yamana is aToronto-based miner that has operations in both North and South America.

"Last year, the company produced 773,000 ounces of gold. This year, the company expects to boost production to 1.3 million ounces.That's a 68% increase!

"On top of that, if AUY's quarterly profits come in at the expected 22 cents a share when they report earnings on March 25, that would put full-year profits at 77 cents a share -- 1,000% higher than last year! If this happens, and it looks like it will, these shares are primed for a nice upward move."

Disclaimer: The Author does not own any positions in AUY, but he's waiting.