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Gold Investment, Gold Companies
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The biggest error an investor might make in the burgeoning third phase of the gold bull market is thinking the boat has been missed after new price territory is reached. Limiting your gains by trading in and out of the physical is insanity. Physical gold should only be considered if you plan to hold on to it for years, not months. Transportation, storage and security issues will chew up short term gains.
Moving into the market we are, where the US Dollar is going to crash in value, and gold is going to head in the opposite direction, it's time to allocate investments intelligently among various assert classes that will benefit from the gold bull.
Producing mining companies are a great way to capture the upside gold will impart, and provides a very limited exposure to risk – especially if you’re considering one of the major producers such as Barrick, (NYSE, TSX:ABX) Newmont (NYSE:NEM) or Goldcorp (NYSE:GG,TSX:G), who tend to develop assets with strong economics in relatively stable countries.
South African senior producers have a special set of challenges ahead of them that make investment there riskier than in their North American counterparts. Electrical infrastructure is in major need of upgrade, and the depths to which these mines now extend negatively impact production costs going forward.
As you proceed down the list of producers, risk is intensified. This is because mid-tier producers typically gain access only to projects too small, too risky or too expensive for the big players. With increased risk comes the potential for a greater reward – especially with companies who have not yet defined the limits of deposits under development, or where the political situation is uncertain.
The biggest leverage right now, especially considering the drubbing they’ve experienced this year, are among the junior explorers. The juniors also occupy the highest risk segment, but no pain, no gain…or at least, little gain.
The current market is not differentiating efficiently the companies with potentially world class deposits and management from the “wanna be’s” who are probably never “gonna-be’s”. And in that lack of efficiency lies tremendous opportunity for risk-tolerant and patient investors.
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