AngloGold (AU): A 'gold bugs' buy

"Don't sell commodities; although they have been in a bruising correction, they can also recover quite sharply," says resource expert Eric Roseman .

In his Commodity Trend Alert, the advisor adds, "And I can't think of a more undervalued gold mining company than South Africa’s AngloGold Ashanti (NYSE: AU."

"The forces of inflation and deflation are now fighting each other for the first time since 2001 and ultimately, inflation will win.

"Meanwhile, AngloGold has been a major disappointment over the last three years at a time when gold stocks have averaged a 15% annualized return based on the XAU Gold & Silver Index. Anglo’s stock price is down 22% in 2008.

"But after a huge decline over the last several years, AngloGold’s stock price is just too low to ignore. At this price, it’s a strong speculation in our portfolio. 

"AngloGold has one of the biggest forward hedged sales among its peers. Steadily rising bullion prices has turned gold producers away from hedging since 2005 in favor of direct exposure to spot prices.

"Companies that have hedged their production over the last few years have been poor performers because spot prices have surged. That trend is finally changing at AngloGold, the world’s third largest gold producer.

"AngloGold’s CEO, Mark Cutifani, was quoted recently claiming he’ll reduce the company’s forward sales by 0.8 million ounces – down to 6.1 million ounces by December. Anglo’s CEO also believes gold prices will end the year at $1,000 an ounce.

"AngloGold has also opened the door to a suitor for a possible merger. I can’t think of a more undervalued gold mining company right now at this depressed price than AngloGold. We are adding the stock to our 'Gold Bugs' model portfolio."