Yamana Gold Shares have fallen 22% in June, Time for a Look

Good ol' Yamana Gold Inc. (NYSE:AUY), the Masters favorite choice for playing the Gold sector.  Now that Yamana shares have come down to the low $9 level after hitting almost $12 at the start of June, its time to decide if the pullback in share price is worth building a small position.  To quote Mr. T - "I believe in the Golden Rule, the man with the gold, rules."

First up, let's take a techincal look at Yamana as well as analyst price targets:

Recent Analyst Action on AUY:

Blogger Jeffery Dean Brown who writes at InvestorSoup.com believes Tamana shares are worth your attention, his reasons:

The stock traded as high as $11.77 on May 29th and dropped to $8.44 at the close of Monday’s trading. In its recent chart, AUY is trading at its lower Bollinger Bands range, a bearish condition signaling that the stock is weak relative to the recent price action. MACD reflects a bearish signal, with the indicator trending below its 9-day moving average signal line, indicating downwardly trending moving averages. HOWEVER, I believe that this stock has significant growth potential.

Several recent developments lead me to believe this stock is due to rise:

1. Yamana Gold announced recently that its shares have been added to the FTSE Gold Mines Index, which reflects the global performance of shares of company’s primarily engaged in gold mining.

“Yamana is pleased to be recognized as a premier global gold producer and to join the impressive group of companies comprising the FTSE Gold Mines Index,” said Peter Marrone, Yamana’s chairman and CEO. “Yamana considers that becoming a member of this prestigious index will further increase global investor awareness and its visibility among index-tracking funds.”

The index restricts listing to those companies with sustainable and attributable production of more than 300,000 ounces per year, deriving the majority of their revenues from mined gold. This single fact is going to do more to drive accumulation in the stock than almost any other factor.

2. Yamana has shown a commitment to be a low-cost producer. The company has stated (and facts seem to bear them out) that it is working diligently to shed costs and to keep its operating costs low. The company has recently shed some of its smaller, lower yield mines and are focusing on their larger, more productive mining properties.

3. The price of Gold itself. While gold has recently dropped in price, it appears that long-term gold will rise. This can only bode well for Yamana Gold and its lean operations.

Since Monday, the share price for Yamana Gold has rebounded strongly closing at $8.78 on Tuesday and, mid-day on Wednesday, trading as high as $9.26.

I believe that the climb has only started for Yamana.

Gold rallied from a six-week low hit earlier on Tuesday, moving toward $920 per ounce, with currency fundamentals proving the dominant factor as the dollar got stung by concerns over US indebtedness.   Fellow Masters, adding gold to your portfolio can be a valuable hedge, and when you get a stock like Yamana that has been beatup and investors are looking for something 'safe' for a few days, that trade can easily become AUY.

Happy Safe Investing Masters and trade AUY with careful timing, remember to take your profits when you rack them up, there's no sense in playing with Mr. Market these days.

Disclaimer: No positions in AUY.