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Gold stock to sell #4: Goldcorp (GG)

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gold stocks to sellImagine what happens to gold mining stocks if gold were to trade for less than $500 per ounce? It would not be pretty. These stocks are priced to perfection and beyond. That is why they should be sold.

Add Goldcorp Inc. (NYSE: GG) to the list of overvalued gold miners. At $40 per share, GG now trades within spitting distance of previous highs.

Those highs were attained at the end of an expansionary period, not at the beginning.

What the gold fanatics fail to tell you is that we are at the beginning of a new period, not the end. Prices should adjust to a deflationary world, yet they trade as if we are in the midst of a horrible inflationary period. Earnings at Goldcorp will not support this share prices, and if the price of gold drops, the situation goes from bad to worse.

I would sell GG immediately, as shares trade for more than 40 times forward earnings.

Next: Gold Stock to Sell #5

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Last updated: November 24, 2009: 04:11 AM

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