The gold stocks are certainly a wise way to bet on a rising gold price, but the differences with an investment in physical gold are enormous. The stock price evolves according to several factors: cost structure, available gold reserves, production cost, geopolitical risks ... A shareholder of a gold mine which was nationalized, for example, will be in deep trouble. Actions are never a refuge, not even when linked to gold. The physical gold and gold stocks are two very different asset classes. The physical gold is more insurance against inflation, the current monetary systems of the central banks and the shocks of the financial system. The gold stocks can be a speculative mean on a subsequent rise in the price of gold. Rob McEwen, Chairman & CEO of US Gold and founder of Goldcorp explains the difference between the Junior and the Senior mining stocks and why he prefers the juniors
Interesting post - I'm heavily invested in gold myself and about 90%+ is via stocks in miners (mostly juniors) but just this week I've been trying to work out how much rising oil prices (and even lack of water!) may effect miners' bottom line in the medium term. We are *perhaps* coming towards a point where owning physical gold is the only real way to play this gold bull. Still pondering...
ReplyDeleteCheers,
mondo @ www.diamondshareforever.com
I'd agree that stock in the actual gold itself is ver different from stock in the gold production companies. It's a good point, in fact, that the price of stock in the companies may in fact be tied to speculation about the price of gold! It's a complicated game, but if played well, can yield excellent results.
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