Investing in Gold Stocks
You and many others are watching gold prices with great interest. This precious metal has done extremely well in the last few years. The value has risen more than 500% to $1,600 per ounce since the turn of the century. Some experts are predicting that it will break $2,000 before long.
The latest rounds of government money-printing have only increased the likelihood of such a turn of events. Not long ago, some naysayers began to predict a downturn in value.
Even world-famous billionaires like George Soros were saying that gold was overrated. However, Soros recently began to move significant portions of his investments into gold. He publicly stated that investors wanted something real now that paper currencies are losing value.
However, even if you want to get into gold, you may not be interested in direct ownership. A lot of gold investors like to purchase actual coins and bars of gold.
They either leave them in the possession of trusted custodians or they put them in their own safes and safety deposit boxes. If you are uninterested in this type of transaction or prefer more abstract methods of gold investment that cannot be stolen, try investing in gold stocks.
Four Different Ways of Investing in Gold Stocks
You can invest directly in gold stocks issued by respected companies that have a long history in the gold mining and refining businesses. The values of these stocks will be dissimilar to the actual price of gold and are not directly tied to its market value.
However, as long as the company is well run, you can naturally expect its stock price to climb along with the price of gold. In fact, these stocks can even outperform gold on occasions when its price is standing still.
The value of a stock is dependent on much more than its product. When the leadership of a company makes good decisions, its stock price can climb without regard to the value of its product.
Invest in gold exchange-traded-funds (ETF)
Most of these will track an index of gold stocks. This will prevent you from suffering the loss that you could experience with investments in single companies while preserving the opportunity to earn money from the increasing value of gold. The ETFs in the US only hold gold bullion as assets but you possess stocks from the companies and not the gold itself.
You could also try investing in gold mutual funds
These will have an even more diverse set of holdings that include gold stocks and other financial instruments. The stocks may be in companies that mine, refine or explore for gold. This gives you exposure to a lot of other businesses while keeping your investment closely tied to the market value of gold.
Investing in gold junior stocks is a little riskier but also opens the door to a lot of possibilities. These stocks are usually issued by companies that do not own very productive mines or are involved in exploration gambits.
These are usually small cap or micro cap stocks that expose you to considerable risks but also offer the chance for unusual gains. If you choose an investment like this, it should be a minor player in your whole portfolio. That way you can earn from unexpected gains while not suffering unduly from their losses.
There are other ways to continue investing in gold stocks after you acquire some experience in these safer alternatives. There is a lot of money to be made in gold futures and options. This route is only for the most experienced investors because it requires very good knowledge of the investment terrain.