Get ready for a rally in the gold patch. I've been saying this many times in Dubai during the last year. And the fact is: some people got so distracted with the SP 500, than they missed the train with gold. Well, I didn't . We've been investing in gold the last 12 months.
Basically we have 2 options with Gold: invest in Physical Gold or Invest in Gold Miners. Let's have a look at one chart of the best performing funds in Hansard in the last 12 months:
If we check Pictet Physical Gold, it's been the best performing fund with 32.95% in 12 months. This fund is basically tracking the price of gold.
Gold mining stocks can be a valuable diversifier for a stock portfolio because they give investors exposure to a commodity that's well-known for its role in holding its value and providing some protection against systemic risks to the global economic and geopolitical situation. So Blackrock World Gold is one of these funds. This fund is investing in Goldminers, mainly located in Canada, Australia, Africa and US, and is up 32.36% in last 12 months.
During March gold mining stocks got crushed along with most other assets. But since 19th of March, we have seen a rally of 26.77%. Not too bad!
The divergence of how the miners performed during the last 3 years with what happened to the price of gold has now become so great that it seems to offer rare opportunities for daring investors. The falling price of oil, and the likely coming rally for gold, only adds to the relative attraction of such mining companies.
Gold to Rally More This Year
Separately, there are reasons to believe that gold itself will continue to rally. The price of 1 ounce today is 1682 USD, compared with 1274 USD one year ago, this is a good run!.
“CPM Group expects gold prices to continue on their upward trajectory during 2020 and to reach new record highs in the medium term,” states the recently published CPM Group Gold Yearbook 2020.
It points to “the largely ineffectual” trade agreement between the U.S. and China, the UK leaving the European Union, and of course the coronavirus pandemic, as factors that will remind investors at large as to the benefits of owning gold. In turn, that should keep bullion prices rising.
Double Dose of Good News for Gold Miners
For the miners, rising gold prices mean more revenue per ounce, while the lower price of fuel will mean reduced costs per ounce of gold produced.
If you are still not sure, look what the wealthiest egyptian is doing, Naguib Sawiris:
In other words, gold stocks may be a good bet right now.
Guillermo Martorell
Dubai
guillermo.martorell@holbornassets.com
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