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2016/07/09

Two Gold Plays You Should Buy Immediately

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Saturday, July 9, 2016


Chart of the Week:
Two Gold Plays You Should Buy Immediately

Anthony Summers, Financial Research Associate, The Oxford Club

chart

The United Kingdom's vote to leave the European Union sent global investors into a frenzy. After a sudden $1.3 trillion drop, U.S. markets rebounded. But that hasn't stopped folks from moving their funds to so-called "crisis" assets.

Today's chart is focused on the one asset gaining the most from market anxiety: gold.

The yellow metal's up big this year, fueled by a demand surge as markets teeter-totter. As you can see, the first quarter of 2016 saw a large flow of cash into the gold ETF market.

It's troubling, considering demand hasn't been this high since 2009.

But it's not just growing demand from investors and central banks pushing prices higher. It's also the expectation for shrinking gold production starting this year.

On top of that, global central banks are giving more serious thought to negative interest rates. A standard objection to holding gold is that it doesn't produce cash flow. But in a negative interest rate environment, holding gold becomes very attractive.

Altogether, these factors have created a unique opportunity to invest in the precious metal and the companies mining it. Which is why the VanEck Vectors Gold Miners ETF (NYSE: GDX) is up 118% year to date.

[Editor's Note: If you're interested in buying physical gold, we recommend you check out Sean Brodrick's guide on how to detect counterfeit coins first. You can find that here.]

One company that's doing very well is Barrick Gold (NYSE: ABX). The world's largest gold miner, it's up over 202% year to date.

A notable billionaire betting big on Barrick is George Soros. He recently bumped up his position in Barrick by more than 19 million shares.

Last year, the company's earnings were in the red. Yet analysts estimate that its earnings could reach $660 million this year... and $953 million in 2017.

Another way to play gold is to invest in the ProShares Ultra Gold Miners (NYSE: GDXX). This basket of miners is up 302% for the year. As a leveraged fund, it tracks twice the daily performance of the NYSE Arca Gold Miners Index (NYSE: GDM).

Just know that this ETF packs a bit of added volatility. So you should consider this play only if you can stomach the greater risk.

And remember...

No matter what's happening in the market, it's never a good idea to put all your eggs in one basket. Gold may be doing well now, but no one knows what the future will bring.

If you want to achieve liberating wealth, you must spread your risk among a wide variety of instruments and sectors. For a refresher on our preferred asset allocation strategy, click here.

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