Gold prices rebounded at the end of the week, and major gold miners like Newmont Mining (NYSE:NEM), Barrick Gold (NYSE:ABX), Goldcorp (NYSE:GG) and AngloGold Ashanti (NYSE:AU) moved up with gold prices in anticipation of an announcement by the Federal Reserve that they'll start another round of quantitative easing.
Quantitative easing or printing money, is an inflationary event which also lowers the value of the U.S. dollar, or any other currency where a country has their central bank throw more money into the market, and the result is gold prices will rise in order to protect against inflation and the debasing of the currency.
That's about to happen again in the U.S., and many gold mining companies and those that own shares in them will benefit strongly.
The only question is how much the market has already price quantitative easing into the price of gold. We'll have the obvious surge in gold price and share prices of gold miners immediately after the announcement, but the support underlying that surge is what is important to investors.
AngloGold Ashanti closed the week at $47.11, gaining $0.67 on Friday, or 1.44 percent. Barrick Gold rose to $48.09, gaining $1.07, or 2.28 percent. Goldcorp ended the week at $44.59, increasing by $0.30, or 0.68 percent, and Newmont Mining surged to $60.86, climbing $1.05, or 1.76 percent.
Monday, November 1, 2010
Goldman (NYSE:GS) Says Buy Halliburton (NYSE:HAL), Citing Liability Headlines
Goldman Sachs (NYSE:GS) said investors should buy into Halliburton (NYSE:HAL) based on liability headlines which very likely won't pan out in their view.
Although there are a lot of contradictory stories emerging from the report from the National Commission on the BP Deepwater Horizon Oil Spill, which concluded the cement mud used to seal the Macondo well of BP (NYSE:BP) was unstable, Goldman seems sure Halliburton did what it could to provide a safe seal, and the drop in share price should be considered a buying opportunity.
"The slurry that was actually used on the well was tested, and passed, prior
to being pumped," Goldman asserted.
Goldman reminded clients in their note that "due to the low number of stabilizers that BP chose to use and urged BP to conduct all proper tests (including a cement bond log, which was not done)."
"At the end of the day, BP ran a negative pressure test and accepted the inconclusive results", Goldman concluded.
This seems to be far too optimistic, far too soon, to come to this conclusion, which bears the resemblance of cheerleading rather than a decision based upon objective response to the conditions.
It's not that Goldman may or may not end up being right about Halliburton, it's that it seems too soon to look at this as an opportunity to buy before this part of the narrative plays out.
Although there are a lot of contradictory stories emerging from the report from the National Commission on the BP Deepwater Horizon Oil Spill, which concluded the cement mud used to seal the Macondo well of BP (NYSE:BP) was unstable, Goldman seems sure Halliburton did what it could to provide a safe seal, and the drop in share price should be considered a buying opportunity.
"The slurry that was actually used on the well was tested, and passed, prior
to being pumped," Goldman asserted.
Goldman reminded clients in their note that "due to the low number of stabilizers that BP chose to use and urged BP to conduct all proper tests (including a cement bond log, which was not done)."
"At the end of the day, BP ran a negative pressure test and accepted the inconclusive results", Goldman concluded.
This seems to be far too optimistic, far too soon, to come to this conclusion, which bears the resemblance of cheerleading rather than a decision based upon objective response to the conditions.
It's not that Goldman may or may not end up being right about Halliburton, it's that it seems too soon to look at this as an opportunity to buy before this part of the narrative plays out.
Halliburton (NYSE:HAL) Share Price Driven by Headlines in Near Term on BP (NYSE:BP) Cement Job
There is no doubt in the short term that Halliburton (NYSE:HAL) shares will fluctuate based on headlines related to uncertainties surrounding the cement job which was identified as unstable by the oil spill commission investigating the cement mixture used on BP's (NYSE:BP) Macondo well.
As the smoke clears some though, a number of financial institutions consider the risk is small for ancillary companies like Halliburton, and believe will be indemnified in the incident.
Canaccord said, "While not a smoking gun, the findings do put more focus on HAL’s cementing role in the Macondo incident. However, do keep in mind that BP made all final decisions, and an unstable cement test alone does not put liability on HAL. In short, we believe that BP remains operator with full responsibility, and HAL still has indemnification protection, from reservoir pollution or contamination, outside of gross negligence (as stated in its service contract with BP, posted in response to today’s letter)."
"Chevron (NYSE:CVX) will discuss the report at the public hearing on Nov 9. Expect headlines to drive stock near term. Market has generally dismissed significant liability for other third-party contractors involved, such as Transocean (NYSE:RIG) and Cameron (NYSE:CAM), whose operations have also been called into question. In other words, we believe the market has scrutinized third-party liability and contract indemnity over the past 6 months, and has come away anticipating BP to bear the full brunt of financial responsibility."
Halliburton closed Friday at $31.86, gaining $0.18, or 0.57 percent. Canaccord has a price target of $45 on the oil services company.
As the smoke clears some though, a number of financial institutions consider the risk is small for ancillary companies like Halliburton, and believe will be indemnified in the incident.
Canaccord said, "While not a smoking gun, the findings do put more focus on HAL’s cementing role in the Macondo incident. However, do keep in mind that BP made all final decisions, and an unstable cement test alone does not put liability on HAL. In short, we believe that BP remains operator with full responsibility, and HAL still has indemnification protection, from reservoir pollution or contamination, outside of gross negligence (as stated in its service contract with BP, posted in response to today’s letter)."
"Chevron (NYSE:CVX) will discuss the report at the public hearing on Nov 9. Expect headlines to drive stock near term. Market has generally dismissed significant liability for other third-party contractors involved, such as Transocean (NYSE:RIG) and Cameron (NYSE:CAM), whose operations have also been called into question. In other words, we believe the market has scrutinized third-party liability and contract indemnity over the past 6 months, and has come away anticipating BP to bear the full brunt of financial responsibility."
Halliburton closed Friday at $31.86, gaining $0.18, or 0.57 percent. Canaccord has a price target of $45 on the oil services company.
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