Gold stocks tend to be more attractive to growth investors than to income investors. Gold stocks generally rise and fall with the price of gold, but there are. Gold stocks generally rise and fall with the price of gold, but there are well-managed mining companies that are profitable even when the price of gold falls. Rises in the price of gold are often magnified by gold stock prices.
A relatively small increase in the price of gold can generate significant gains in the best gold stocks, and owners of gold stocks tend to earn a much higher return on investment (ROI) than owners of physical gold. Investors can use gold futures as a convenient alternative to buying real physical gold. Futures allow investors to “store value”, protect against recessions and market risks, speculate on prices, and benefit from short-term fluctuations in gold. Investor-owned futures usually culminate in a cash liquidation, rather than the delivery of gold.
So is gold a safe investment? In the long term, stocks have surpassed gold by a wide margin. What happens in the future will depend on the performance of companies and the economy, as well as on inflation. However, gold is likely to maintain its value, and it's hard to imagine a scenario in which gold investors are wiped out. In addition, since gold does not produce cash flow, in order to make a profit with gold, investors must rely on someone else to pay more for the metal than they do.
Finally, if your primary interest is to use leverage to benefit from rising gold prices, the futures market may be your answer, but keep in mind that any holding based on leverage involves significant risk. . In fact, some investors believe that silver is a better investment because there is greater industrial demand for the metal. Before passive and quantitative investment gained prominence, stock selection was the holy grail of fund management.
Investors like gold for many reasons, and it has attributes that make this commodity a good counterpoint to traditional securities, such as stocks and bonds. The reasons for the importance of gold in the modern economy center on the fact that it has successfully preserved wealth over thousands of generations. It's about investing in gold, instant diversification and affordability, all in one small, tidy package. Gold does not corrode and can melt on a common flame, making it easy to work with and seal it as currency.
Over the years, it has served as a hedge against inflation and the erosion of major currencies and is therefore an investment worth considering. An investment in gold also tends to work well during a financial crisis, when geopolitical tension increases, or when a war breaks out. For example, gold prices experienced some significant price movements this year in response to the current crisis in the European Union. Many are starting to view commodities, in particular gold, as an investment class to which funds should be allocated.
At the other end of the spectrum are those who claim that gold is an asset with several intrinsic qualities that make it unique and necessary for investors to keep it in their portfolios. Investment decisions should be based on an assessment of your own personal financial situation, your needs, your risk tolerance and your investment objectives. Three of the largest ETFs include SPDR Gold Shares (GLD), iShares Gold Trust (IAU) and the Aberdeen Standard Physical Gold Shares (SGOL) ETF. .