Breakout of the Gold Price
Bull markets can be classified as either secular (long-term) or cyclical (bull phases in an overall bear market). Before the June 2019 breakout of $1,400 per ounce, technical analyses indicated that gold was in a cyclical market. A longer, sustained rally is now likely – perhaps similar to the secular gold bull market of 2001 to 2008.
Invest in Gold
Gold has been a store of value for thousands of years as a mean of
payments or as jewelry for example. Investing in gold can be interesting
for a lot of investors, learn why:
How to Invest in Gold
There are several ways to make an investment in gold and thus obtain exposure to its price. We will explore:
- Gold bullion or gold coins
- Gold jewelry
- Gold certificates
- Shares in gold miners (or a more diversified option like a gold miners ETF)
Let’s take a look at each of these options.
Overview of the Advantages and Disadvantages of Various Gold Investment Products
Bullion and gold coins
Gold mining shares
Gold mining ETFs
Invest in Gold According to Your Own Time Frame
The different gold investment options also vary in terms of time frame, liquidity and their suitability for certain types of investor.
Investing in Gold With Gold Mining Shares
Mining shares from companies like Newmont Corp or Barrick Gold Corp are an indirect way of profiting from developments in the gold price. Their prices usually correlate with the price of gold and offer the following advantages:
- You avoid the storage costs of bullion. These costs can be considerable with respect to the necessary security measures.
- Gold mining companies can pay dividends, which can influence your yield on investment. In the case of bullion, the yield is derived solely from the price gain (or price loss). Needless to say, a price gain cannot be guaranteed.
- Gold mine shares may increase in value without the gold price increasing. This may occur, for instance, if the company carries out operational improvements that improve profitability. Note: the value can also decrease due to unsound management.
Historically, the share prices of gold miners have increased disproportionately when gold prices increase. The reason is that their profitability increases disproportionately if revenue increases while costs remain the same. Conversely, the opposite is also true: When gold prices drop, the share prices may drop disproportionately. This is a meaningful element to keep in mind when deciding to make an investment in gold through gold mining shares.
Invest in Gold Miners via ETFs
If you want to broadly invest in gold mining shares, you can turn to gold mining ETFs. This instrument eliminates the need to search for promising individual shares and allows investors to buy across the entire sector on a broadly diversified basis.
VanEck offers two gold mining ETFs that invest in shares of gold mining companies:
Investing in gold miners is subject to a number of specific risks. The most important one is sensitivity to the price of gold. Additionally, there is the risk of investing in the natural resources sector: companies can be negatively affected by numerous factors, such as political and economic circumstances, exchange rate fluctuations, import restrictions, and exhaustion of natural resources.