How To Invest in Gold

Invest in GoldInvesting in Gold can be seen as a safe haven for many when confidence is low in the markets and in the economy. Gold value per ounce is a regular metric being shared globally through daily news along side your country’s currency and oil prices. I am not an investor in gold as it doesn’t fit my dividend investing strategy but I am really curious about what motivates others to invest in gold. Leave a comment if you invest in gold – I love to hear about your strategy.

Regardless of your motivation to invest in gold, there are a number of ways to be exposed to gold; from buying gold bullions to investing in gold mining companies to investing in precious metal ETFs. In some cases, you can even have a dividend paying gold mining stocks :).

Invest in Gold Stocks

Barrick Gold (TSE:ABX, NYSE:ABX)

Barrick Gold is the largest gold producing company by market capitalization at $31B and as of today, it just happens to have a dropped in prices of over 7%. Interestingly enough, ABX has a dividend yield of 2.57%. I did not expect such a dividend yield and I have since added it to my screening list to look further. If you invest in ABX, you also end up diversifying into other resources such as copper, oil and gas.

Some key metrics on the company:

  • Price: $31.90
  • P/E: 6.95
  • Market Cap: $31.84B
  • Dividend Yield: 2.55%
  • EPS: $4.58
  • 52 Week Range: 31.18 – 55.36
At those rates, my screening strategy ranks Barrick Gold with a 5.13 value rating (out of 6). Only a handful companies rank higher at the moment. I paused for a second and I want to look further into the company considering the P/E is really low and it is trading at its 52 week lows. What’s going on is basically my question? Is it better than Teck Resources (TCK.B) which ranks slightly higher at 5.23.

Goldcorp (TSE:G, NYSE:GG)

Goldcorp is the next largest gold producing company by market capitalization on the TSX. It also offers a dividend with a yield of 1.54%. Both Barrick and Goldcorp are often mentioned on the Business News Channel (BNN) with different takes from analysts.

Some key metrics on the company:

  • Price: $35.38
  • P/E: 18.40
  • Market Cap: $28.66B
  • Dividend Yield: 1.54%
  • EPS: $1.92
  • 52 Week Range: 32.34 – 55.93
Goldcorp earns a value rating of 4.24 (of out 6). Such value is usually decent but since gold isn’t my thing, I just ignore it :)

Kinross Gold (TSE:K)

Tough year for this gold producer. From peaks of $20 down to 25 cents and back up to the $8 range. The roller coaster ride was enough for me to stop looking any further.

Some key metrics on the company:

  • Price: $8.25
  • P/E: negative
  • Market Cap: $9.40B
  • Dividend Yield: 1.92%
  • EPS: -$1.98
  • 52 Week Range: 0.25 – 8.33
I am not going to bother with tracking this company since it was a penny stock not long ago and penny stocks aren’t my thing either :)

Invest in Gold ETFs

Above is just a few of the gold producing companies out of many. Barrick and Goldcorp are really the two major companies I hear of and I prefer to stick with the big players.

If you are just getting started with gold, it might be easier to just get a gold ETF and buy a little bit of the many gold producers through an ETF. XGD from iShare tracks the S&P/TSX Global Gold Index Fund and contains 59 holdings. The index is down 26% from a year ago, down 3% from 5 years ago and up 105% from 10 years ago. The rule of 7 says you should double every 7 years with a 10% compound growth. Doubling your money in 10 years is not that bad but you obviously need to have a good stomach for the ride.

Invest in Gold Bullions

If you want to own gold as is, then the bullion is for you. Investing in gold bullions is similar to buying currency in a way. You buy it at a certain price and hold it until you want to sell. Gold prices fluctuates over time and it’s rated by the ounce. Have you tried to buy gold bullion yet?

Readers: Are you a gold investor? Let me know why you buy gold?


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6 Responses to "How To Invest in Gold"

  1. Gold has its price increased to 1600 $ that 4x its original price.Thou we should consider that is a risky and long term Investment,it would be wise to consult a Finance Adviser like Ed Butowsky before Investing.

  2. Liquid says:

    I’m not a big gold investor but I do have 5 to 10 percent of my portfolio in precious metals. On the gold side I like to invest in mining companies, for example Goldcorp, simply because I think they are undervalued based on historical P/Es. They have underperformed the underlying commodity for some time now but I think once investors realize just how much reserve these large cap multinationals have in their mines we’ll start to hit an inflection point and these stocks will start to increase again. For people who want to buy the bullion but can’t afford a whole ounce, or prefer more liquidity, many professionals recommend the etf GLD in the US, or the etr MNT in Canada. Both try to match the price of gold. On the silver side I’m invested in Silver Wheaton because they are a royalty streaming company and aren’t subject to mining risk. I also have silver bullion :). I buy gold mining companies because I believe their earnings will grow over time. And I like silver because it’s used in just about all TVs, cameras, smart phones, mirrors, cars, solar panels, dental supplies, etc. So I’m bullish on the industrial demand of silver in the long run.

  3. I love to think about the possibilities in investing in gold mining stocks but it is really difficult to make a positive correlation between them and the price of gold. There are just so many intangibles to calculate. For example, we all know that gold reserves are never guaranteed. This makes it easy for me to avoid gold mining penny stocks. Similarly even the biggest company’s like Barrick conduct their business in some of the most dangerous places in the world. History has shown a world leader can easily nationalize what they want.

    On the other extreme I am hardly acquiring physical gold anymore because it is just so hard to move. People talk all the time and even I thought you could just unload gold at anytime because it is so precious and valuable. The truth is, no one in your neighborhood would buy your gold for cold hard cash when they don’t need it. Even jewelers and coin collectors will not buy the stuff except at extreme discounts. Having to store it is a liability in itself. It’s a security issue.

    That is why I have to say I mostly support the purchase of gold ETF’s. It is really hard to beat the GLD. It has excellent liquidity and makes a small percentage of my portfolio.

  4. Margie says:

    I am an advocate for holding physical gold bullion. I can’t give you the exact date when your gold coins are going to be worth more than they are today, but I believe that the state of the US economy, and the state of the world economy for that matter, is so out of whack that the price of gold has no choice but to go higher because there’s no plan in place to straighten out this mess so the US dollar is going to continue to fall.Protect yourself and buy gold bullion. One site that I use is for great prices and service.

  5. Not a fan of gold myself, but for the sake of diversification, a little bit through an ETF doesn’t hurt the portfolio at all especially if there’s a dividend involved.

  6. Matt Alden says:

    The only gold I own is a few mint gold coins that I’ve had for over a decade.

    In hindsight, they’d actually have been a pretty good investment if I were to sell them now.

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