GOLD!
That was the subject on most people’s minds this week. So we put our Legacy Research analysts on the case… And they came back with some great insights.
So make sure you read and save today’s Daily Cut mailbag edition… It’s packed with our best answers to all your biggest questions about gold.
Let’s start with one that affects everybody who has a retirement account.
Gold industry insider E.B. Tucker provides the insight…
Reader question: I’m retired now and in the same boat as some of your other readers. I cannot put a lot of cash into physical gold, but I could redirect a certain amount of my 401(k) funds into gold stocks, but I’m not sure about ETFs [exchange-traded funds].
Without giving investment advice, could you go into more detail about the difference between investing in actual physical gold and investing in physical gold stocks and ETFs?
– Anonymous
E.B.’s answer: Before owning a gold stock, it’s wise to have some physical gold. That’s because gold is a tangible asset that you can hold in your hand. It’s real money, a safe-haven asset, and a way to protect your wealth. It’s survived every financial crisis and will continue to do so.
Then, you can speculate on higher gold prices by buying gold miners, which gives you the chance to multiply your money in a gold bull market.
You can look into an ETF like the VanEck Vectors Gold Miners ETF (GDX), which holds a basket of gold stocks.
But the best way to take advantage is by following our advice in my Strategic Investor newsletter. In our core portfolio, we have a world-class gold miner that’s up more than 45% since we added it last year. This is no penny stock. This multibillion-dollar miner turns a profit and pays a dividend.
Just remember, gold stocks are extremely volatile. Like in any industry, the stocks of stronger companies will go up more than those of weaker ones. As always, never bet more money than you can afford to lose.
It takes only a small stake in the right companies to make a fortune as gold prices rise.
Next up…
Our resident “rock hound” (aka geologist), Dave Forest, answers another question about investing in gold through your retirement account…
Reader question: Hello. Can you please recommend the best mutual funds for gold? I am restricted to buying mutual funds in my 401(k) from my employer, so I would like to know which ones you recommend. Thank you!
– Marla H. (Legacy Research member)
Dave’s answer: I don’t follow or invest in mutual funds, so it’s a bit hard to comment on specific ones. But it’s hard to imagine any gold-linked investment being a bad decision as we head toward another big stock market collapse.
In general, all gold-linked investments did very well in the wake of the 2008 crash. They initially dove with everything else, but they recovered those losses in a matter of months – and then went on to significant gains. So in short, yes, I think gold mutual funds would be fine for investing, especially if you’re worried about a crash.
In the short to medium term, junior gold exploration stocks are a better bet. Those tiny stocks tend to enjoy a delayed rise, a little after physical gold prices move up. That “wave” is still coming, and I’m positioning in the juniors ahead of it.
But in the long term, all of these gold stocks are good spots to be in.
The wider stock market is rolling over, financial markets are strained, and the Fed is injecting hundreds of billions of dollars daily to keep them afloat. We don’t know for sure if a crash is coming, or exactly when another 2008 crisis might hit – but why make yourself worry about it?
Put a small amount of your portfolio in an investment like gold that goes up when the stock market goes down. Then, rest easy knowing you’ve got “catastrophe insurance” that will pay your bills even if the worst case happens and big stocks melt down.
You might even make a tidy profit in the meantime. Remember, gold stocks as a group gained 62.5% in the year leading up to the 2008 crash. Some junior mining stocks did even better. And the whole gold complex roared up over 180% after the crash.
Moving on from retirement accounts…
Our next reader has a question about investing in the physical metal for our world-traveling gold bug, Tom Dyson.
Reader question: Do you buy your gold in ounce coins, or smaller fractions of, or bars of bullion, or do you just have some paperwork from a company showing you own some gold?
I thought the small coins would come in handy for bartering someday. I’d appreciate any suggestions. Thanks, and have fun [on your travels]!
– Anonymous (Legacy Research member)
Tom’s answer: I bought the cheapest physical gold I could find. I looked at Krugerrands, Maple Leafs, even Chinese Pandas. I looked into buying gold bars. I called a handful of different dealers. And I calculated the price I was paying per ounce of actual gold. (Some coins aren’t pure gold.)
In the end, I found one-ounce American gold coins from the late 19th century and early 20th century were just about the cheapest way I could buy physical gold.
I was the type of kid who loved finding and collecting old pennies, so I went for the vintage coins over Maple Leafs, Gold Eagles, etc. But I wouldn’t have done this if they weren’t also the cheapest way of buying physical gold.
I also bought a basket of “blue chip” gold and silver mining stocks and a silver ETF.
But I like physical gold the best. This might sound silly, but the main reason I like physical gold is it’s inconvenient to sell. I can be a little impulsive. This has undone my investment success in the past when I’ve sold great investments too soon.
For our last gold question, let’s look ahead…
And for that we turn to master trader Jeff Clark, who enlightens a very appreciative reader.
Reader question: Really appreciate your services. I feel like I’m back in school. Keep up the good work.
Can you update your subscribers with your gold outlook?
– Daniel L. (Legacy Research member)
Jeff’s answer: Gold stocks have been chopping back and forth for more than three months. Every time it looks like GDX [the VanEck Vectors Gold Miners ETF] is finally going to break down and decline to where I’d like to buy it ($25-ish), it somehow finds support and bounces. Then, every time it looks like it’s ready to break out and start a new rally (above $28), GDX hits resistance and turns back down.
In this sort of environment, the ONLY really smart thing to do is to simply wait it out. Yes… it is enormously hard to be patient. But the “chop” will eat you up. It will mess with your emotions. It will wear you out. And, it will eventually convince you to abandon your trading discipline and just make trades for the sake of doing something.
And then the “chop” will take all of your money.
Don’t let that happen. Instead, just wait it out.
Those are all our questions and answers for this week. But before you go…
If you own any physical gold that’s worth less now than when you bought it, you need to read this essay from Palm Beach Research Group analyst Grant Wasylik…
Use This Gold Loophole Rule to Save on Taxes
You’ll be very glad you did.
Enjoy your weekend!
Regards,
 |
James Wells
Director
Like what you’re reading? Send your thoughts to [email protected].