If you don’t own any gold stocks yet, this article is intended to convince you to pick up the phone and call your broker – or to log in to your online brokerage account – and to buy some shares.
Now, I obviously can’t know the ins and outs of your personal financial situation. I don’t know your risk tolerance, your time frame or your asset allocation.
But if you’re more or less like me:
- You have an investing timeline between one and 30 years.
- You have some cash on the sidelines that you’ve been keeping ready for a great opportunity,
- And you have a decent amount of risk tolerance to stay in an investment if it goes against you in the short term…
Then I think you should give your portfolio some exposure to gold stocks today.
Before I tell you why, I’d like to tell you the operating assumptions that I’m making. If you disagree with the crux of my assumptions, then you probably shouldn’t buy gold stocks.
My biggest assumption is that the bull market in gold will continue for the foreseeable future. We may have corrections – some of them severe correction of up to 10% in the short term – but the trend is up, and gold is headed higher for the next couple years.
I make this assumption for the simple reason that there do not appear to be very many headwinds for the trend. All of the reasons that were given to not buy gold at $800 are the same reasons I’m hearing today.
It’s at an all time high. Gold has no yield. You can’t eat gold. US debts aren’t "that" bad.
Everyone owns gold.
Not to be overly dismissive, but to quickly rebut all of these ridiculous claims: Gold is still under its all time inflation adjusted highs. The dollar doesn’t have a yield either. You can’t eat Treasuries. US debts are "that" bad – we’re currently the largest debtor nation in HISTORY.
And no, not everyone owns gold. Barely anyone owns gold. If every American owned just one ounce of gold, it would wipe out the entire bullion production for one whole year. But we also know that people throughout Asia, Europe and South America are increasingly turning towards gold.
The fact is, gold is extremely under owned by most people – perhaps especially in the West.
I’m still buying gold. I plan to buy more during substantial dips. And I think you should own gold too – but today the better deal is in gold stocks. That’s because today, gold stocks as an asset are selling at a massive discount to the price of gold.
In fact, this divergence is at or near record levels. We haven’t seen anything like this since the financial crisis of 2008 caused a huge sell-off in gold stocks.
That’s right, the last time gold stocks were this cheap relative to gold, it was AFTER a monumental selloff.
I’ve recommended buying two ETFs to give yourself exposure to gold stocks: the Market Vectors Gold Miners ETF (NYSE: GDX) and the Market Vectors Jr. Gold Miners ETF (NYSE: GDXJ).
If you have no exposure at all, you should consider picking up equal helpings of these two ETFs.
If you’re looking for specific exposure to individual companies, you’ll have to wait another day. I’m currently working with one of our top analysts to put together a special report one our favorite individual gold stocks which will be completed in the next couple weeks.
Please keep your ears open, as I’ll be discussing this report in the weeks ahead.