New investors look for quick ways to make money but rarely think of mining stocks as options. While that’s admirable, usually, a quick flip can become a stressful trade. Penny stocks are well-documented to turn small investments into significant profits quickly. That’s, of course, if traded correctly.
However, these are different categories altogether when it comes to mining stocks. While these too can increase rapidly, it depends on more than just trading momentum. Gold stocks are popular for new and experienced traders alike. Thanks to global unrest and economic slowdown, they have caught a lot of attention in 2021. But are they right for you?
Read More: 3 Top Mining Stocks To Watch Before 2022
Gold Stocks To Buy: Are They A Good Fit For My Portfolio?
When it comes to things like gold stocks, you’ve got to look at specific things that might be able to drive them higher. Most of this will have to do with the price of gold. So what are some tailwinds for mining? Take a look at economic conditions and currency valuations. Changes there can trigger monstrous moves for gold stocks.
When it comes to other mining stocks, you may find benefit from increased attention on sectors like renewable energy and electric vehicles. Considering that one wind turbine can require over 300 tons of steel, nearly 5 tons of copper, 700 pounds of rare earth minerals, and 3 tons of aluminum, a new wind farm can be a massive catalyst for certain mining stocks.
Also, consider what it takes to create traditional power. These processes are heavily dependent on copper, for example. It is used in components to generate energy and sustain it within capacitors. Aside from this, look at population growth as well.
Potash is a mineral heavily used in farming for fertilizing crops. Higher populations mean more food production and, in turn, higher crop yield requirements. This is just the tip of the iceberg, too, but it should get you started on the path to thinking about what else can boost mining stocks.
Gold Stocks & Steps To Take Before You Buy
When looking to invest, people often purchase gold or silver as an option. Though, when buying precious metals sometimes, it’s not as easy as it appears. When someone is new to investing, they often get lost in a variety of possibilities: “Should I buy gold stocks, minted bars, or sovereign coins?” or “Perhaps that limited edition coin would be a good investment?”
Those wise about their investments tend to evaluate bullion options by the cost and premium on the gold spot rate. But the premium is only one piece of the puzzle. It doesn’t necessarily mean that you’ll see a return upon the sale.
As a result, it’s essential to educate yourself on precious metals before jumping into this market. In this article, With that being said you as you continue to read, you will see some questions answered on what to do before buying precious metals.
What Is the Best Way to Invest in Precious Metals?
You can invest in gold stocks and silver stocks by investing in companies that own the physical metal, such as bullion bars and bullion coins. There are also financial products like gold exchange-traded funds known as (ETFs).
Each method has its pros and cons. While spending capital in precious metals by way of ETFs might look attractive due to its convenience, there are several essential concerns that investors need to be conscious of in connection to this style of investment.
For example, if you invest in gold through an ETF, you don’t truly own the gold. You have zero rights to the gold within the fund. This means that you cannot take delivery of the metal if the need arises.
In contrast, the key benefit of obtaining physical gold is that you are the sole owner of the gold. Moreover, you control an asset that can be saved outside the financial system, decreasing counterparty risk.
This refers to the risk that the other individual in an agreement will default or fail to fulfill their obligations. When investors buy gold ETFs, they lean on financial institutions to deliver on their commitments. In this respect, obtaining physical metal is a more practical option.
- Investors can gain exposure to precious metals in two forms: physical gold such as bars and coins or financial products such as ETFs.
- With a precious metals ETF, you don’t truly own the gold or silver.
Gold Stocks: Should I Buy Gold Bullion or Silver Bullion?
While gold and silver have desirable features, gold seems to be the more logical investment for the typical precious metals investor. Gold has a much larger liquid market fueled mainly by investment and the demand for jewelry. The price of gold is less volatile than that of silver, too.
While silver is more of a risk, it directly relates to economic activity. This is because silver has numerous industrial uses. As such, silver can be attractive in the midst of a down cycle when metals prices are less expensive.
The advantage of silver is that it’s much cheaper than gold. Therefore, it’s more available to small investors.
With much more volatility in the stock market right now, there are plenty of ways that investors are hedging. With that, mining stocks with exposure to gold and silver could be something to take a closer look at.
The Choice Is Yours
When it comes to investing in mining stocks, the choice is yours. Some will decide to buy things like gold or silver stocks to hedge against inflation. Others will look to take advantage of some of the healthy dividend yields. Meanwhile, other types of mining stocks will give more direct access to the price fluctuations in the metals themselves. Whichever you decide, it’s never a bad idea to do your research and understand exactly what an investment in certain mining stocks will get you.
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