How to Invest in Gold Stocks [Insider Interview]

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Investing in gold has been one of the best returns of 2020 and some analysts think it could double from here. I recommended investors buy gold in a March video, but after a 28% return, it’s time to revisit whether gold is a good investment.

We’ll cover the supply and demand factors that go into prices as well as how to invest in gold but what I’m really excited about is the opportunity to get Amir Adnani on as a guest to share his insider insight into gold as an investment.

Amir is the Chairman and Founder of GoldMining Inc. (GOLD:TSX) The company is a $300 million miner with projects in Brazil, Canada, the and Colombia. Amir directs the company’s resource acquisitions across the Americas. He’s also the President and CEO of Uranium Energy Corporation, ticker UEC, and one of Fortune magazine’s 40 under 40 list.

Check out GoldMining Inc, ticker GOLD:TSX or GLDLF in the , and how it’s beaten the gold miner index on smart acquisitions.

The price of gold hit an all-time high this year but has come down lately and is looking more volatile after a nearly 100% return over the last few years. It’s winning out as the ultimate safety investment as interest rates crash and the value of dollar crumbles.

But with the economy rebounding, how much further can gold prices go? The government and Fed is pumping trillions of dollars into the economy. That should cause inflation and some analysts have come out with gold price estimates as high as $4,000 an ounce but we could also see prices drop back where they traded last year.

Of course the question here is how to invest, whether it’s in physical gold or stocks.

We’ve talked about physical gold before and I hold some but there are some drawbacks. The fees are really high, usually something like a 4% charge on each side to buy and sell, so that price has to move about 10% higher just to break even. You’ve also got storage costs and other risks.

With stocks, you can invest in the ETFs like the SPDR gold shares that holds physical gold and then sells shares in the inventory but really the investment I like is investing directly in the miners.

With the miners, you don’t pay an expense fee like you would with the SPDR gold shares. You also get investment in a company that’s producing profits, so we’ll look at that returns chart again; GoldMining Inc is in green, the gold miners fund, the GDX is in red and then in purple I’ve added shares of the GLD gold fund.

And what you notice is that the miners and GoldMining here give you the potential to vastly outperform gold prices on return. These are leveraged companies that are not only benefiting as the price of gold increases but also just from that good management that’s producing higher profits.

I like gold here. I wouldn’t be jumping in with everything but I have just over 5% of my portfolio in the asset through physical holding and gold miners. Besides that potential return, this is going to be one of your best assets for those what-if scenarios like a stock market crash or just that general trend lower in the value of the dollar.

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Joseph Hogue, CFA spent nearly a decade as an investment analyst for institutional firms and banks. He now helps people understand their financial lives through debt payoff strategies, investing and ways to save more money. He has appeared on Bloomberg and on sites like CNBC and Morningstar. He holds the Chartered Financial Analyst (CFA) designation and is a veteran of the Marine Corps.
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