Gold Stocks or Gold ETF How to Find the Next Winner
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So what do you do?
class="cap">G old
You load up on assets Stocks - A contrarian view leveraged to the price of Gold – on where the next Gold Stock namely Gold stocks.
winners will emerge.
Wrong!
Searching for the Golden
As Old Gold Bulls we have seen Goose?
this situation before. A low
For years we have been growth high inflationary speaking and writing about the environment is poisonous for massive bind the Fed now finds equities – Gold stocks included. itself in. With price inflation And whilst the storm persist in rising – read as food and energy the equity markets it will either skyrocketing -- and little hope drag gold stocks lower or prevent for nominal interest rate them from fully expressing increases – read as housing too themselves to the upside! That’s weak for higher rates – negative why we encourage investors to Real Interest Rates (nominal have a portion of their portfolio rates less inflation) looks set exposed directly to the metal to persist for some time.
either through ETFs, Futures or
Now why is that important?
Physical.
Firstly, not only do negative
Hunting Elephants
real interest rates make holding
There is no doubt that an non-income producing assets such equity risk premium has weighed as Gold attractive, but an heavily on Precious Metal environment where inflation is equities and that stabilization allowed to have its way and in equity markets would certainly economic growth is sick benefit such stocks. But that’s (stagflation), is tantamount to old news.
the perfect storm for Gold Stocks
What we consider interesting and other Precious Metals!
and downright fascinating is the
nature of Gold Equities investors has since been towards large should be focusing on over the caps. next year.
Secondly...
Conventional wisdom is that
The trend in large caps from the juniors are where the value to growth also looks to investment gems lie. We don’t have bottomed around late 2006. disagree – entirely.
We define growth as earnings
Over the longer term (3-5 growth of +15% p.a. and/or PEG years) the fundamentals certainly ratio of around 1.5.
favour late stage explorers and
These trends resonated well emerging producers, but an with us as large cap Gold overlooked market dynamic causes producers beat out small cap us to lean rather towards their miners over the last year leaving larger cousins.
many a gold stock speculator
As we have alluded to above, highly frustrated.
Gold Stocks and other Precious
Where to find such Elephants Metal equities are equities and that will benefit from these more often than not subjected to trends?
the same forces as the general
We would begin by looking at equity market. One such force is components of the Gold Stocks ETF the veritable WALL of passive (GDX) or the Amex Gold Bugs Index indexed money. By some accounts (HUI).
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Gold Stocks or Gold ETF How to Find the Next Winner
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