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Gold commodity prices have risen for ten straight years. The question, of course, is what they will do for the next ten years. The fundamentals that have caused gold to grind higher for the first decade of this century haven’t changed. If anything, faith in the U.S. Dollar has diminished further, even as it’s veracity as the world’s reserve currency is challenged by nations with a more robust economy than the United States.
World events are creating an enormous amount of uncertainty. Gold has been recognized as a store of value and symbol of wealth since the Wise Men took Jesus gold, frankincense, and myrrh. It has been chronically viewed as a source of stability as financial refuge. Unlike the various forms of “money” printed on different colored paper, gold is universally accepted as money regardless of where you happen to find yourself on the planet.
Gold Commodity Prices Have Some Going Underground
As gold commodity prices continue to rise, opportunities for profit persist. However, there will remain opportunities in gold even if the price doesn’t climb any higher. We need only take a lesson from the world’s billionaires. Wealthy individuals are having a difficult time even getting their hands on substantial amounts of bullion. In lieu of warehousing vast quantities of metal, assuming they could get it, some of these folks are taking huge stakes in mining companies.
Gold is sold at the then current spot price, plus whatever premium your dealer requires. However, the angle of the world’s wealth, and astute individual investors, is to buy the gold while it’s still in the ground. Producing mining companies can often mine gold at attractive prices. Thus, rising prices only contribute to an enhanced internal rate of return. But even stable prices can produce enormous profits as the miners sell into a market at spot prices that are well above their financial models and real production costs.
Gold Commodity Prices And Opportunities For Sniffing Out Market Inefficiencies
Generally speaking, gold commodity prices are fully factored in to gold investments. This is at least true of those that are tied to the price of bullion itself. So, ETFs, bullion funds, and the metal itself have a strong correlation to gold prices. Even large gold producers can be quite consistently priced in accordance with current metal prices. Though they may lag a bit, widely followed companies witness a response in share price that quickly factors in news and metal prices.
By contrast, there are smaller gold companies that are not so much subject to this “efficient market hypothesis.” The junior resource stocks are often thinly traded companies that are in the exploration phase of the mining cycle. They may have little in the way of assets and just enough cash in the bank to keep going for a while. Large money managers are unlikely to invest in these speculative plays. And, even if they wanted to, liquidity could be an issue when it comes time to exit a large position. The market simply may not be able to absorb so many shares.
Since these tiny companies are hidden from view for most analysts, you can dig around and find some real deals. Current market factors, including company developments, may not be built into the share price in a timely manner. Picking up small companies that are grossly undervalued only amplifies the investment potential for companies that find what they are looking for. You now not only have potential gold in the ground, which is cheaper than gold in the dealer’s showcase, but also gold in the ground at an irrationally low price. This drastically reduces your downside risk and magnifies your upside forecast.
Gold Commodity Prices Allow You To Enjoy Great Gains If Gold Doesn’t Rise
Every indication points to rising gold commodity prices. However, the good news is that there is fantastic money to be made in the precious metal mining world even if it doesn’t. In fact, a great number of producing miners have financial models that are based on gold prices that are 50-70% of current gold rates. So, even if gold goes down, these companies remain profitable. As they pull more bullion out of the ground, and expand their projects, the bottom line improves. This is an opportunity that you don’t find in something like the Public Bank Gold Investment, which is essentially a passbook account tied to gold prices.
Gold Commodity Prices And The Chance To Experience Generational Wealth If Gold Does Rise
The real magic, of course, happens when gold commodity prices elevate. If they move stratospheric, you’ll see life changing wealth beyond comprehension. Miners enjoy relatively fixed production costs, short of somewhat higher energy costs. What this means is that there is major leverage in the mining companies to the underlying metal price. Rising prices exponentially impact the company’s internal rate of return. ETF gold funds linked to the bullion price don’t see this epic rise. This makes a huge difference to profitability, which results in increased share price at alarming rates once the general public realizes their DOW and NASDAQ stocks don’t hold a candle. The forecast for gold commodity prices point to even bigger gains this decade than last.
