What Will Next Year Look Like for the Gold Stock Market?
When markets are volatile, investors often turn to gold and other precious metals. This can be a great way to have a more stable portfolio. For hundreds of years, gold has been one of the most prominent safeguards of wealth. Because of its intrinsic value, gold is usually less volatile than the market. In short, gold can be a great way to avoid speculative turns in the stock market.
[Special Report] This Junior Gold Stocks Could Be The Biggest Opportunity Of 2020
Diversifying one’s portfolio with precious metal investments is a very popular trading method. While investors can buy gold bullion, many turn to gold stocks as it is much safer than holding physical gold. Since March, the price of gold has been rising at a steady pace. At the beginning of August, the per ounce price of gold hit a new all-time high of roughly $2,000 per ounce.
A large number of market analysts have stated that the value of gold could continue to rise throughout 2021. For this reason, let’s take a closer look at how gold stocks and physical gold could be a solid safeguard investment for the next year.
The Ins and Outs of Gold Stocks
When we talk about gold stocks, there are a few companies to keep in mind. These companies usually operate by mining large quantities of gold in mines around the world. By buying gold stocks, investors can have a diverse portfolio with a solid amount of exposure to the precious metals industry. This is also a very popular choice when compared to purchasing solid gold bullion.
One reason in favor of gold stocks is the safety aspect. With physical gold, investors have to find a place to store the metal. This can be a very expensive process and one that can be more tedious than necessary. In addition, gold stocks do not need insurance like gold bullion does. While there are advantages to gold stocks, there are also disadvantages to keep in mind. The most prominent is that any stock, let alone a gold stock, will carry market volatility with it. This is because all stocks have a high correlation to the market as a whole.
Gold bullion, on the other hand, does not carry any trading related volatility. In addition, gold bullion will not lose value during economic turmoil like a gold stock may.
What Could Happen With Gold Stocks in the Next Year?
Some of the most popular gold stocks to watch like Newmont (NEM Stock Report), Barrick Gold (GOLD Stock Report), and Agnico Eagle Mines (AEM Stock Report), saw a lot of growth during the most recent second quarter. Other gold investments like the SPDR Gold Trust (GLD ETF Report) and VanEck Vectors Gold Miners ETF (GDX ETF Report), have also outperformed the market through 2020 thus far.
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Because there is so much volatility in the market, investors have continued to move toward gold stocks. This is especially true given the pandemic and its effects on global stock markets. In addition, when the public’s faith in the U.S. dollar goes down, the value of gold tends to go up. With COVID, investors and the public alike have become increasingly unsure about the economy’s future.
Retail Investors Continue to Hedge Bets on Gold Stocks
In the past few months, research has shown that retail investors are more interested in gold than in previous years. On the investing app Robinhood, investors have continuously shown bullish sentiment in relation to gold and gold stocks. Although this may not be a long term phenomenon, in the short term, investors are showing a desire to buy gold. It is difficult to predict the future of the market even outside of a COVID-ridden world.
Many of the largest banks in the world have stated that the price of gold could continue to rise. Goldman Sachs, recently saw its $2,000 price target for gold met in a short period of time. After the price rose, Goldman Sachs announced that gold could shoot up to $2,300 in the next twelve months. In addition, Bank of America stated that gold could have a $3,000 high in the next year. Again, the future is uncertain. But, the sentiment from these top banks shows that there is a great deal of bullish interest in gold.
Whether it is gold stocks or physical gold bullion, investors should continue to watch the price of the yellow substance throughout the next year and beyond.
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