Gold stocks can be as viable investments as gold bullion is these days. The reason is that (old) mining stocks hold a leverage or value to the price of gold. It is without question that the price of gold is not so much high as is the value of the US dollar that has fallen. Since gold is traditionally priced in US dollars, as the dollar falls the price of gold rises. This is the exact reason why gold functions as such a powerful hedge against inflation. (Gold) Metal stocks are linked to the value of gold because of what investors consider to be the reserve of in-ground-gold that mines possess. In other words if the gold stock is purchased when gold is $200 per troy ounce and the spot price of gold rises to $1800 per troy ounce, then the value of the metal stocks also rise because the gold that is currently being mined is suddenly more valuable.
Gold Stocks -The Value of the Dollar:
To consider gold stocks or to ask is gold a good investment, consider the likely hood of the value of the US dollar. America 2011 is sitting on a pre-election year. Traditionally the American investments become slightly more unstable when there is a potential change in presidency. Americans are not fond of change in leadership or rather they are not fond of the uncertainty that surrounds change in leadership. Also, take into consideration the political unrest that is happening in the United States. Movements like “ Take Over Wall Street”, are signs of unrest among the American people. Why are these items important? They are important because they all point to a continually weaker dollar. The wearer dollar means a potential increase in the price of gold. This further translates into better investments for gold and metal stocks. This helps to answer the question – Is gold a good investment?
Gold Stocks Vs Gold Bullion:
Gold stocks offer a value that gold bullion does not. That value is the absence of costs associated with buying physical gold. There are no dealer markups, shipping cost, storage costs, or insurance costs that are associated with physical gold. This means that the investment in (gold) mining stocks is just a simple investment transaction. Is gold a good investment? In terms of cost and price, yes it is a good investment. Even considering the astronomical rise on the price of gold today, gold is still a good investment because the likelihood that the American dollar will continue to fall in value. Precious metal stocks should continue to offer a very good return on investment for investors.
Gold Stocks – The Price of Gold:
Gold stocks and the price of gold are tied together in a parasitical type relationship. While the price of precious metal stocks does little to affect the price of gold, the price of gold can affect the price of gold stocks. The relationship between stocks and the price of gold revolves around the mining of gold. Specifically, it revolves around the amount of gold that a mine has in the ground. This is called a reserve of gold. As the price of gold rise or falls, the value of the in ground gold becomes more or less respectfully. This is the crux of the risk that is associated with buying any stock. The question to ask is if gold is a good investment. If the answer is yes, then the market is expecting that the price of gold will continue to rise. This would make investing in metal stocks a potentially lucrative investment, as well. This again, goes back to the question about what will happen to the American Dollar? Will the dollar continue to fall in value? Will inflation continue to rise? Will the price of gold continue to rise? All of these questions go in to the determining whether or not gold is a good investment.
Gold Stocks – Tips About Price:
It may seem odd that many mining companies have listed different prices of the value of their gold. Why would that be if the price of gold is unilaterally consistent? The reason for the difference in pricing is relevant to all stocks. Issues that can affect mine production are paramount factors that affect the price of gold offered by mines. Political unrest, work or labor issues, natural disasters such as earthquakes, can all affect the value of mining stocks. Other factors that should be considered are the price of operations, production rate, etc. These factors, while affecting the price of gold produced, may actually be beneficial to investors of mining stock. If those factors are corrected, and production goes up while the cost of operations goes down then the value of the stocks will rise. Opportunity, to say the least may be at hand.
Is gold a good investment? The answer to that question will change on a daily basis. This is because the factors that go into determining the price of gold change on a daily basis. For mining stocks, the factors that affect the value of those stocks also change frequently. This makes it difficult to answer that question. Investors should consider the daily price of gold along with the potential for the value of the US dollar to fall or rise, as indicators for gold as an investment. Investment in mining stocks should also be considered carefully with additional research being focused on cost of operations and productivity of the mine in to determine if gold is a good investment. The outcome will indicate who likely the investment will pay off in the future.