Are gold stocks a good buy?

Gold stocks are often 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.

Are gold stocks a good buy?

Gold stocks are often 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 owners of gold shares generally get a much higher return on investment (ROI) than owners of physical gold.

Many Wall Street professionals would urge you to keep at least a small part of your portfolio invested in gold. Although the stock market has historically produced impressive long-term returns, when the market is on the downside, safe havens such as gold help offset declines. The strong diversification of these funds protects the investor from volatility because when one share falls, profits in others help reduce the impact. VanEck Vectors gold miners ETF (GDX), on the other hand, is a passively managed fund that tracks an underlying basket of shares of gold mining and refining companies.

Value investing is a factor-based investment strategy that involves choosing stocks that you believe are trading for less than they are intrinsically worth, usually by measuring the ratio between stock price and one or more fundamental trading metrics. A bullish action above average volume is usually a bullish sign, while a stock declining above average volume is usually bearish. Gold mutual funds, such as the Franklin Templeton Gold and Precious Metals Fund, are actively managed by professional investors. A strong weekly advance (especially when accompanied by an increase in volume) is a sought-after metric to put potential momentum actions on one's radar.

Tier 1 gold miners have low-cost structures, manageable debt levels, and limited exposure to risky mining projects. The returns of the Zacks Rank stock rating system are calculated monthly based on the beginning of the month and the end of the month, the Zacks Rank stock prices plus any dividends received during that particular month. If you think gold could be a safe bet against inflation, investing in coins, bars or jewelry are paths you can take to gold-based prosperity. Stocks that pay dividends tend to show higher returns when the sector is rising and doing better—on average, almost twice as much— than stocks that don't pay dividends when the sector is generally in a recession.

Gold has one of the highest liquidity in commodity markets and, in most cases, its value has increased over time. Essentially, Franco-Nevada Gold provides the initial money miners need to operate their mines, which is a very expensive business. Even those investors focused primarily on growth rather than stable income can benefit from choosing gold stocks that demonstrate historically strong dividend yields.

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