A question of gold

[arminius]

if the US economy tanks, and if the US dollar also tanks, the price of gold goes up.
is the best profit strategy to buy 1-pure gold or 2- small gold explorers/miners with big potential or 3- bigger gold miners with higher costs but who could profit more relatively with a surging gold price?

the question then is which company. there are hundreds i know, but does anyone wish to share an absolutely rock solid gem?

i am certainly not an expert here and cant offer anything of value. nevertheless i have some avo and dont mind the look of pru.

i would like to be financially secure one day via some exceptional stock market decisions made about now.
my sincerest thanks to anyone who could steer me in the right direction.
Brett.

 

[explod]

Re: a question of gold.

if the US economy tanks, and if the US dollar also tanks, the price of gold goes up.
is the best profit strategy to buy 1-pure gold or 2- small gold explorers/miners with big potential or 3- bigger gold miners with higher costs but who could profit more relatively with a surging gold price?

the question then is which company. there are hundreds i know, but does anyone wish to share an absolutely rock solid gem?

i am certainly not an expert here and cant offer anything of value. nevertheless i have some avo and dont mind the look of pru.

i would like to be financially secure one day via some exceptional stock market decisions made about now.
my sincerest thanks to anyone who could steer me in the right direction.
Brett.

AVO perfect, hold. Producers in the beginning, explorers with good assays down the track and specs later on when the taxi drivers are on to it, then sell the next trading day.

Good rough rule of thumb.

With currency devaluation, physical will be the best deal and sell when Uncle Festivus says so.

 

[chops_a_must]

Re: a question of gold.

if the US economy tanks, and if the US dollar also tanks, the price of gold goes up.
is the best profit strategy to buy 1-pure gold or 2- small gold explorers/miners with big potential or 3- bigger gold miners with higher costs but who could profit more relatively with a surging gold price?

the question then is which company. there are hundreds i know, but does anyone wish to share an absolutely rock solid gem?

i am certainly not an expert here and cant offer anything of value. nevertheless i have some avo and dont mind the look of pru.

i would like to be financially secure one day via some exceptional stock market decisions made about now.
my sincerest thanks to anyone who could steer me in the right direction.
Brett.

If you can find a coin dealer that will sell you various coins at their spot metal worth, rather than with any numismatic value attached, it might be a good strategy. That way you can buy in whatever amounts you want.

 

[So_Cynical]

Re: a question of gold.

if the US economy tanks, and if the US dollar also tanks, the price of gold goes up.
is the best profit strategy to buy 1-pure gold or 2- small gold explorers/miners with big potential or 3- bigger gold miners with higher costs but who could profit more relatively with a surging gold price?

the question then is which company. there are hundreds i know, but does anyone wish to share an absolutely rock solid gem?

i am certainly not an expert here and cant offer anything of value. nevertheless i have some avo and dont mind the look of pru.

i would like to be financially secure one day via some exceptional stock market decisions made about now.
my sincerest thanks to anyone who could steer me in the right direction.
Brett.

A few Aussie gold miners have started to sell there gold at market rates
so there directly exposed to the gold price..the share price of the miners
should benefit more than the prospectors, with miners there production
costs are fixed so any increase in the POG is pure profit.

 

[ducati916]

Re: a question of gold.

if the US economy tanks, and if the US dollar also tanks, the price of gold goes up.
is the best profit strategy to buy 1-pure gold or 2- small gold explorers/miners with big potential or 3- bigger gold miners with higher costs but who could profit more relatively with a surging gold price?

the question then is which company. there are hundreds i know, but does anyone wish to share an absolutely rock solid gem?

i am certainly not an expert here and cant offer anything of value. nevertheless i have some avo and dont mind the look of pru.

i would like to be financially secure one day via some exceptional stock market decisions made about now.
my sincerest thanks to anyone who could steer me in the right direction.
Brett.

Brett

Some factors to consider;
*physical production of gold is limited to X%/year
*equity dilution of mining companies is in theory unlimited

Therefore, if you are investing in gold for an increase in value, it makes no sense to invest via common stock.

*physical is unleveraged
*gold futures provide significant leverage

This chart demonstrates the loss of value within common stocks of [gold] mining companies.

 

[resourcesman]

Re: a question of gold.

Ducati, That graph doesnt say anything about whether gold futures or miners are the better investment. The gold miners have been doing badly for the past couple of decades largely because of the drop in gold price in real terms.

I agree with most of your other points.

Brett,

If you want to play purely on the gold price then gold futures are the way to go. Investing in miners/specs, etc means that you are also taking a bet on that particular company, meaning that your returns will be dependant on other factors, not only the price of gold. On the other hand, buying into miners means that you will still probably be earning something, even if the gold price does not move much. As ducati was saying, alot of it comes down to how certain you are of the impending upward movement of the gold price.

 

[Sean K]

Re: a question of gold.

[Therefore, if you are investing in gold for an increase in value, it makes no sense to invest via common stock.

It may still depend on what stock you invest in.

There are plenty of bad examples of gold stock returns but there have been a few good ones. I'll just highlight the two biggest goldies in Australia.

Obviously there have been a lot of dogs though, and as always, I am using selected examples to highlight my point. As we all do.

I suppose the retort is: Have these companies returned greater than holding the physical? I'd be interested to know. Cheers.

 

[arminius]

thank you gentlemen. i really am a novice when it comes to futures etc, so i will try to learn up on it a bit.
i have read a lot of posts by you fellas and i know how switched on you are, so thanks for taking the time here. appreciate it.

most of my other stocks wont produce for a year or two eg gbg, roy, aru, and i dont mind waiting. im not after a quick buck per say. more of a future for the kids. in saying that, do perseus, pacrim look ok?

 

[So_Cynical]

Re: a question of gold.

Brett
Therefore, if you are investing in gold for an increase in value, it makes no sense to invest via common stock.

People do whats easy...and if/when gold surges they will take the most
obvious/easy avenue to invest.

The miners.

ducati...lets say the POG reaches 800 USD in the next few months
are u saying that good miners like say "Lihir" LGL wont double in price
because there profits have doubled.?

 

[reece55]

Re: a question of gold.

I suppose the retort is: Have these companies returned greater than holding the physical? I'd be interested to know. Cheers.

Love it Kennas, love it.......

The pick of the bunch IMO is clearly Lihir, which has the lowest cash cost of almost any Gold miner in the world......... They have 100% leverage to spot due to the restructure of their hedge book and valuation wise are looking nice. NCM has also finally put out some good numbers (and boy, hasn't that been about time). The worst, well as Kennas said, there is plenty of them, but I think PSV and BDG top the lot..........

What investors have to remember is that with a producer, it's fair that it track fairly close to movements in spot, but when an explorer or entity that is years from production does this, there are issues...........

Inevitably, mining is a fickle industry. Every expert geo I speak with (and I speak with a few regularly) says that until you are producing, you never know what kind of ore body you are going to encounter....

So my underlying message, buy the producers - yes, less return, but compared to the risk, its a no brainer......

Cheers

 

[Uncle Festivus]

Re: a question of gold.

Therefore, if you are investing in gold for an increase in value, it makes no sense to invest via common stock.

If gold is going up I would have thought the premier low cost, high production, unhedged gold producers would be excellent leverage as, assuming costs are static then it all flows to the bottom line eg LGL.

Futures would come a close second.

Legal tender gold coins next eg Australian $200 coin.

Allocated bullion followed by unallocated bullion would be the next.

From experience I would think bullion bars would be the lowest returning investment due to the holding costs eg doesn't pay interest, security concerns when buying & storing & low leverage. Unless you are a big player it's not worth the trouble.

I suppose the retort is: Have these companies returned greater than holding the physical? I'd be interested to know. Cheers.

Looks like it depends on the company and your entry timing. If you do your homework & jag a junior that takes off you would be measuring the return in the 100's of percent eg SBM, AVO. The problem with juniors in this climate will be raising enough cash to advance promising projects.

Reece, I wouldn't right off BDG just yet, things starting to happen soon?

 

[reece55]

Thanks for the chart there UF - I actually only looked back 3 years for LGL and the thing has gone up 3x since then, but I didn't realise that it has been pretty close between NEM, LGL and physical.....

I completely agree with you about BDG now - the cash position more than anything should provide them with years of exploration and the reality in my mind is that the area is extremely prospective - I think in the future their is little doubt they will be up into production again and then perhaps we can say goodbye to the mess that occurred back a little while ago!

Cheers