Sunday, August 19, 2018

It is difficult to say how low share prices will go before they turn around, but there are some clear markers that help you analyze these things.   This won’t be a post about all of the factors, but one is the value of what you sell.

Gold metal has been declining in value for about six weeks now and gold miners are taking it on the chin.   Many investors can’t buy gold directly or through futures, so the best way to take advantage is through buying the companies that produce gold.

Now to be sure, gold could go down by another $200 an ounce but sooner or later, it will need to reflect the cost of production.   Given that Goldcorp is one of the lowest cost producers, it is a good bet on benefiting from a rise in the price of gold.

20180818 - GG

When buying companies that are falling quickly, it is good to spread your purchases out over a few days or even weeks to allow for the issue to ‘bottom out’, so if you like the idea of owning a gold miner, GG is a good bet.

Also note that there are many ways to play this idea.  Gold is now significantly below near term prices, (the chart below represents weekly closing prices) but still above lows from the past four years.   If you think gold is going to go up, then you can buy gold from some financial institutions, you can buy gold futures through a broker, you can buy gold miners such as gold corp, shown above, or you can buy gold ETFs.

Note that highly leveraged products such as Horizon’s Gold (2x) (HGU.TO) have risks associated with the use of leverage and are not for investors, but traders.  The same could be said for using futures to take advantage of any predicted move in gold prices.

Owning a miner such as Gold Corp is a good way to participate without the stress of getting things right, right now.   Over time, gold is likely to be worth more than the $1,184 it is trading at right now, and the gold miners will increase in value to reflect any future price increases.


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