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Identifying successful gold stock picks seems to be both an art and a science. And it’s never been more important to master both sides of this equation so you can effectively play gold for both protection and profit. Some of the best returns the markets have to offer are coming from precious metals. And the profits from mining companies are staggering. Understanding your options, as well as having a basis for choosing your gold stock picks, is the very beginning of the process. It’s more difficult than buying a bullion fund or gold ETF product, buy much more rewarding when done correctly.
Gold Stock Picks For Offensive Financial Planning
The fact that gold rose for ten straight years at the beginning of the century has changed the way many people view the yellow metal. After President Nixon shut down the gold connection to the U.S. Dollar back in 1971, any control over paper money was lost. The ability to print money from thin air and thus devalue the dollar was understood by many, if even at an elementary level. It didn’t take long for people to shift their thinking from viewing gold as a backing for the Dollar to seeing gold as an independent asset that could be owned as a hedge against further manipulation.
However, even as a hedge, gold’s role as a place of safety was generally a very minor part of financial planning. A default rule of keeping 5% or so of assent in precious metals seemed to have developed as the laws of the universe on the matter. In reality, however, a 5% reserve of gold and silver would do little to protect your wealth if the remaining 95% of your assets are tied up in a failing fiat currency. These days, however, it’s noteworthy to see a major shift in the way gold and silver are used in a portfolio. Conservative managers are advocating more on the order of 10%.
Gold is providing not only safety, but also solid profit after tripling in value in the last five years alone. Extreme speculators such as myself are nearly 100% in gold and silver, along with other resources, including top gold stock picks in addition to the hard goods. While the underlying hard assets will continue to put on respectable gains, the companies that produce the resources will generate mind-numbing returns. To provide an example, keep in mind that many gold producers have financial feasibility models that are based gold at $900. Without getting too technical, you have to realize that the internal rate of return on these companies can simply explode as metal and resource prices rocket higher. Aside from modest increased energy costs, these companies have rather fixed costs. If they are profitable with gold at $900 an ounce, imagine what it is like for gold to be selling for $1,500 an ounce? This is why the price of resource stocks can multiply exponentially relative to the price of the underlying assets.
Gold Stock Picks And The Role Of Experience
The simple fact of the matter is that mining and resource stocks are probably the most volatile of all investments available. Even with the major producers, things can go wrong, even with what you thought were the best gold stock picks. But the junior explorer companies are like burning matches. They run through cash and don’t produce much. They only have success when they find the goods. So there are a lot of factors that go into stacking the deck in your favor for winners. Picking mining companies at random or responding to the latest, greatest email pitch for the next big thing sure to hit the jackpot is not exactly a sound methodology for responsible speculation.
Chances are, to be successful you will need some guidance identifying your final list of gold stock picks. Most of us who have been around the resource sector for a while have cut our teeth and taken our lumps. We have developed a sort of sixth sense. I can’t exactly explain it, but I’ve gotten to the place where I can begin to feel when a stock is a bit top-heavy. I have a pretty good understanding of when spot metal may be due for a retracement. It takes a lot of experience, and practice, to get to the place to where you can separate the wheat from the chaff and identify those companies most likely to succeed. Practice can be costly, in both time and money. So it may be wise to hire some help and up your odds.
Gold Stock Picks From Canada… And Beyond
My favorite gold stock picks are those companies listed on the Canadian exchanges. The TSX is perhaps more widely known, but the TSX-V (Venture Exchange) is home to the “junior resource” companies that at times produce the insane returns you hear about. Indeed, 10,000%, 50,000% and even 85,000% has come from these types of tiny companies that hit the motherlode.
Canada is really an ideal jurisdiction for miners and other resource companies. On the one hand, Canada is very “mining friendly.” Canada, as a nation, has vast amounts of natural resources. A huge number of jobs and a decent slice of its economy hinges on exploiting resources for profit. Ditch this industry and about 1,000,000 people are now out of work! On the other hand, note that the Canadian exchange is very user friendly as well. The regulatory systems in place in Canada lead to considerable investor confidence and faith in the infrastructure, and so this safe trading atmosphere generates lots of activity. This, in turn, creates liquidity, which is simply a benefit to all involved. Fortunately, many American brokerages are able to access the Canadian exchange either through their account, or else through a parallel account.
It’s worth pointing out that the Canadian exchange is not merely populated by Canadian companies, just as Canadian companies are not restricted to exploration, development and production only in Canada. It’s not necessarily intuitive, so I want to be clear that there are foreign companies with excellent mining operations in other parts of the world. They nevertheless want to be on the Canadian exchange in order to access the breadth of resource-savvy investors that stand ready to support viable resource plays. To properly sum it up, you can have Canadian companies engaged in Canada and abroad, as well as foreign companies engaged in Canada and abroad. So, you have it all available conveniently on one exchange.
Gold Stock Picks… And A Few Other Worth Considering Too
There’s no question that Canada offers some of the best gold stock picks on the planet. However, it’s important to remember that there are a whole host of other natural resources that are likewise in a bull market and are benefitting from the epic resource boom. Canada, for instance, has loads of oil. Whether discussing tar sands or the prospects of shale oil, there’s plenty there. Canada also has great deals of uranium and prospectors in hot pursuit of rare earths. Apart from precious metals, you’ll find zinc, aluminum, copper, and nickel too. Fertilizer abounds, including the much popular potash. So, the key is to compile a solid list of gold stock picks, but save room for diversified resource plays.
