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A few weeks ago, I wrote about gold and since then, it has continued to go up and there continues to be a lot of hype about gold for many different reasons. There are economists, such as Peter Schiff, who have been very vocal about his beliefs that gold will skyrocket. And given he was right in many regards about the recession and the housing collapse, his views are getting a lot of attention. As well, right wing media (i.e. Fox) has been very active in associating the current economic crisis with the depression era and putting up the message that gold will be the best (and sometimes only way) to espcae personal financial collapse.I see these right wing scare tactics as very suspect and it does not help seeing those Gold vendors who are Fox sponsors. There are a lot of conflicts in this “Gold story”. And so seeing all this gold bulls go mainstream is certainly worrying for anyone considering diving in.
Why gold could go up
With that being said, I do still think there are many reasons to like gold as an investment for a few reasons:
-There continues to be a lot of speculation and evidence of foreign governments diversifying away from the US dollar as there continues to be a lot of worry about its medium to long term direction. As that happens, governments are buying foreign currencies such as the Euro but also gold. A few of the emerging economies (India being one of the more public ones) have been stacking up on gold. This has contributed to increasing gold demand.
–Inflation Hedge: There is a lot of debate over this but gold still remains to this day one of the more efficient inflation hedges. And with the money that continues to be issued by the US and foreign governments to fund their deficits, inflation worries do remain and if that happens, TIPS bonds and gold would be the two logical safe heavens.
-And finally, another debate is about the possible major drop of the economy/stock market. There continues to be many analysts who believe that the markets went up too fast compared to the economy and that a major decline is still a possibility. Not sure I would say I’m a big believer in those theories, but if you are, gold would be a good investment option.
Physical gold or not?
Going along the line of a collapse, many believe that owning physical gold is the only way to go. Their arguments are generally that in case of a complete collapse, the system could break down and even those ETF’s that replicated gold returns or who are supposed to own physical gold, might not be able to fulfill their obligations and so owning gold is the best way to keep your “hedge” for this “End of world” type scenario. I’m not a big believer in this theory as I generally do believe in the financial system as well as the fact that it will be saved if hell breaks loose. As well, you generally end up paying a lot of fees when buying physical gold.
One such place is Goldline where you can buy actual gold coins. You will end up paying a lot more but if that is what you are looking for, go ahead:)
For others, gold investments can be done in many ways, but the two easiest ones are:
Gold ETF’s
Here is a list of the Best Gold ETF’s as well as their descriptions, fees, etc.
Ticker Name Price Dividend Yield Payout Ratio
NRZ New Residential Investment Corp 6.1 11.48 N/A
DLR Digital Realty Trust Inc 52.49 5.95 196.84
FUR Winthrop Realty Trust 11.16 5.82 139.4
NHI National Health Investors Inc 61.73 4.99 98.56
EARN Ellington Residential Mortgage REIT 16.45 12.16 N/A
PMT PennyMac Mortgage Investment Trust 23.56 10.02 70.67
CMO Capstead Mortgage Corp 12.565 9.88 132.56
STWD Starwood Property Trust Inc 24.04 7.65 109.46
ACRE Ares Commercial Real Estate Corp 13.3 7.52 2353.23
NCT Newcastle Investment Corp 5.705 7.01 28.25
BXMT Blackstone Mortgage Trust Inc 28.235 6.38 0
SIR Select Income REIT 27.32 6.73 54.76
Miner stocks
And finally, if you wish to invest in a miner stocks, the main ones are Canadian companies, I have a list that includes only the non-penny stocks that have revenues for the past year and a large enough market cap. Most of these are also listed on US exchanges.
Ticker Name Market Cap Price Fees 1Y Return Dividend Yield
PID PowerShares International Dividend Achievers Portfolio $1,075,402,343.75 $17.84 0.56 10.28 2.23
IDV iShares International Select Dividend ETF $3,273,594,482.42 $37.36 0.5 13.35 4.55
DVYE iShares Emerging Markets Dividend ETF $180,712,112.43 $45.75 0.49 -13.59 4.89
DWX SPDR S&P International Dividend ETF $1,308,791,137.70 $46.57 0.45 2.97 6.98
SDIV Global X SuperDividend ETF $819,529,296.88 $23.32 0.58 7.78 6.82
LVL Guggenheim S&P Global Dividend Opportunities Index ETF $88,325,202.94 $12.99 0.65 3.18 6.66
Let me know if you have any questions regarding these stocks!
Great post! I’m gold bull. I think that a correction phase will come, but I think another reason would be that there is a possibility of gold shortage. In the long term, I would mostly buy through physical gold holdings (yes!) and also exploration companies … I like Kinross Gold Corp (KGC). They are involved in exploration and production located in countries all around the world. I think it’s a good pick.
SPDR Gold Shares (GLD) is quite big. MARKET VECTORS JUNIOR GOLD MINERS (GDXJ) can be a surprising one too. What are your thoughts between those 2 ETFs?
@Lewis – Thanks a lot for the idea on Kinross, will take a look at it
About the ETF’s, since one tracks the actual gold and the other tracks miners, I would say they are very different and difficult to compare. Personally, I would probably prefer GDXJ right now but it’s a matter of opinion.
I believe that gold is not a place to invest. “Dollar down, Gold up” or “Dollar up, Gold down” –> OK it’s not perfect correlation, but with the dollar going stronger maybe this cause the gold to go down! And I’m also worried over speculation in gold.
@Frank – Yes, the correlation is very true but I think many expect the dollar to actually fall in the near future. I’m still not convinced of either way.