On the first day of the 2009 Prospectors & Developers Association of Canada’s (PDAC) convention in Toronto, John Doody, editor of the Gold Stock Analyst newsletter, addressed a crowd of interested investors at the Investors Forum. Mr. Doody’s newsletter focuses on gold producers and near producers.

Content from his speech included:

Doody believes the price of gold is going to outperform the S&P 500 – this could mean a move to US$1800 to $4200 an ounce based on the historic gold/S&P ratio

Why he favours gold stocks?

1. Leverage to the gold price

2. Gold stocks are undervalued compared with the price of gold

3. Profits are set to soar – why?

a) Oil is 25% of the cost of operating a mine and the price of crude has dropped about 71% from its high

b) Many currencies of countries that have producing gold mines are down 20% to 30% versus the U.S. dollar. This means these companies will be realizing lower cash costs

c) Gold’s average price has been rising

All of these factors should drive profit growth, which will attract analyst and investor interest

John Doody’s PDAC stock picks:

European Goldfields (TSX: T.EGU, Stock Forum) – He believes this stock is undervalued as the market is valuing its gold reserves at $25 per ounce

Northgate Minerals (TSX: T.NGX, Stock Forum) – He claims the stock is trading at a Price/Operating Cash Flow of 0.8 (October data)

Minefinders Corporation (TSX: T.MFL, Stock Forum)

Royal Gold (TSX: T.RGL, Stock Forum) – Doody says this company has the potential to pay $1 a share in dividends and he has a $60 a share target price on the stock.

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