Is it worth investing in gold stocks?

Investors buy gold to protect themselves from risks such as rising inflation, geopolitical events and economic recessions that can make the price of gold highly volatile. Gold stocks are usually more attractive to growth investors than to income investors. Gold stocks generally rise and fall with the price of gold, but there are well-managed mining companies that are profitable even when the price of gold falls. Increases in the price of gold often increase in gold stock prices.

A relatively small increase in the price of gold can lead to significant gains in the best gold stocks, and gold stock owners generally get a much higher return on investment (ROI) than owners of physical gold. For a long time, gold has been regarded as a safe haven in times of market turmoil. Many investors have gained exposure to the precious metal by buying shares in companies engaged in exploration and mining. Some of the major players in the gold industry include Franco-Nevada Corp.

If you choose to invest in gold with bullion, it is also a good idea to keep up to date on the price of gold, so you can choose the right time to buy most dealers update their prices based on current spot prices. Gold bars are the physical metal itself in a refined format suitable for trade and can appear as gold bars, bullion or coins. You can also choose to buy gold that you can wear or that someone has ever worn but has suffered damage in the form of gold jewelry. It is clear that gold has historically served as an investment that can add a diversifying component to your portfolio, regardless of whether you are concerned about inflation, a declining U.

Because gold is an alternative commodity, it helps to diversify your investment portfolio and, in doing so, provides strong inflation protection. In the case of a margin call, you may be asked to invest additional money to prevent your investment from being liquidated without your consent or prior notice. Throughout history, few investments have rivaled gold in popularity as a hedge against almost any kind of problem, from inflation to economic turmoil to currency fluctuations and war. Government title to all gold coins in circulation and end the minting of any new gold coins.

Investing in physical gold can be a challenge for investors more accustomed to trading stocks and bonds online. Most countries adopted the gold standard, which involves fixing the value of their currency at the price of gold. Investing in gold isn't for everyone, and some investors just bet on cash-flowing businesses instead of relying on someone else to pay more for the shiny metal. However, keep in mind that the shares of gold companies are correlated with gold prices, but they are also based on the fundamentals related to the current profitability and expenses of each company.

While this value may change, a key reason investors opt for gold is because physical gold is easy to liquidate. Any estimation based on past performance does not guarantee future performance, and before making any investment, you should analyze your specific investment needs or seek advice from a qualified professional. Between account opening fees, fees that can reach 15 percent or more of your investment (including any leveraged portion), storage fees, management fees, and ongoing interest on the loan on the leveraged portion of the purchase of precious metals, it can be difficult to make money with investments in precious metals. But investing in the physical metal can be very attractive for some investors looking to diversify their investment portfolios.

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Steve Langehennig
Steve Langehennig

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