Gold stocks: Why the sector is still a bargain

Precious metal has doubled in price over the past three years while costs have not kept up We've been saying since September that gold producers are undervalued, and here are some data that show just how extreme the undervaluation is. The following chart measures the stock prices of major and intermediate gold producers against their Net Asset Value, based on the daily price of gold. In the simplest terms, a company should be worth more as the product it sells rises in price faster than the cost of those sales. In this case, gold has doubled in price over the past three years while costs have not kept up, dramatically increasing the intrinsic value of a reasonably well-run gold producer. Yet look what the stocks have done when measured against this higher value.

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