How to Invest in Gold Stocks

How to Invest in Gold Stocks
By Mike Clemson
The initial point that a good trader must know is that gold shares have mostly underperformed the price of gold over the last ten years.
Mining is hard enterprise. In reality, mining could possibly possibly be the worst possible business on the face of the earth. Initially discovering and producing gold requires a lot of money. A business must invest millions before even one ounce of gold is retrieved. Secondly the cost of gold is risky which means that a gold firm never knows what it's earnings will be.
The list of difficulties for mining firms does not stop there. Gold companies also have to cope with tainted overseas governments in the most exotic areas on the earth. There are generally environmental complications, labor union problems and the raw materials such as energy tend to vary in price. For these reasons, investors like Bill Ackman have remained away from the precious metal industry.
For these points, most retail investors have remained away out of gold stocks. In addition in the past very few years numerous gold ETF's have hit the market place such as GLD. This makes it possible for an investor to buy "paper gold" and not fret about doing due homework on exploration providers. In the very last gold bull market (1970's), mining stocks soared however there were few investment options. One point that should be noted is that investors piled into gold stocks at the tail end of the bull market in the 1970's.
Possibly most investors will go forward to employ the GLD for exposure think that at some level speculators will commence to get exposure to gold stocks that are geared to the price of gold.
Most investors commonly separate gold shares into a few categories. There are massive producing gold firms like Agnico (AEM), Anglogold (AU) and Goldcorp (GG). These companies produce millions of ounces per year and have company valuations over $20 billion.
The next tier of gold stocks are mid cap stocks that have production. This might include Kinross (KGC) or RandGold (GOLD). These companies generally have market valuations over $1 billion.
The last tier of gold stocks are exploration stocks. Basically, these companies have a market caps under $100 million. They often trade on the Canadian Venture exchange. The whole business model of these corporations is basically to discover gold and then sell the business to one of the large cap gold stocks. If it sounds similar to lottery tickets, that is because it is a real gamble.
Find out tips to buying gold stocks like professional money managers by visiting our gold stock website at www.goldinvestmentnetwork.com.
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