Gold Stocks

Gold Stocks

Many investors, especially newer and novice investors are often frightened and intimidated by trading gold bullion. The commodity exchange can be intimidating, and it is definitely not for the timid, or weak of heart. For people who are looking to invest in gold, but don’t want to go the commodity or futures route, there are many other gold investments that are available.


For the investor interested in buying gold, but not interested in trading commodities, and excellent investment vehicle would be Gold Exchange-Traded Funds, or GETF’s. GETF’s are funds where the underlying asset is gold. Investors buy shares, which are traded on all the major stock exchanges, including the NYSE.


There are also other stocks that trade on the large exchanges that are not GETF’s, but are gold based, or are companies that work in the gold industry.


Most of the larger companies that are listed on the international stock exchanges are mining companies, or the companies that actually mine gold. These stocks have a close relationship, since as the value of gold increases, the value of the stock increases. For example, if gold is trading at an all time high, a company that mines gold would also trade high, if for no reason other than fundamentally. When gold supply is down, gold is more expensive, and the mining companies therefore need to increase production of gold. This need to increase production also has other positive effects, such as the need for more jobs, and that also helps the economy of the location where the company and its mines are located. It is quite the symbiotic relationship, which all goes back to the value of gold.


One of the largest gold mining companies is Yamana Gold (NYSE:AUY), which is a Canadian company that is a leading producer of gold. Yamana has mines in South and Central America. Another large gold mining company is Goldcorp (NYSE:GG) which is also located in Canada. Goldcorp as over 17 mines, which are also located in South and Central America. In 2007 Goldcorp produced 2.3 million ounces of gold at a cost of $163 per ounce. Considering gold is selling around $850, it is quite easy to see the profitability of gold mining, and why gold mining stocks are often some of the safest investments one can make. Furthermore, Goldcorp pays its shareholders a dividend, and has a balance sheet that is completely free of debt.


The largest of the gold mining companies is Barrick Gold (NYSE:ABX). Barrick is located in Toronto Canada, with subsidiaries in Australia, Africa, North America and South America. Barrick is actively mining is the United States, Canada, Australia, Peru, Chile, Russia, South Africa, Pakistan, Argentina, Tanzania, and most recently, Papau New Guinea. Its 2006 gold production was 8.64 million Troy ounces at a cost of $282 per ounce. Barrick is known as an excellent company, but its fundamentals are a bit more concerning than other companies, and therefore, the price of their stock could, at times, not mirror the increase (or decrease) in the value of gold. Barrick has faced a great deal of criticism due to their environmental record, and they have also faced quite a few lawsuits concerning anti-trust laws.


In general, gold stocks are an excellent investment. They have the benefit of being in the gold industry, which is very secure and often quite stable. However, because gold mining companies are separate entities, they are also facing some fundamental challenges that gold does not experience. For example, when trading gold, there is no company president, or board of directors, to affect the share price. When buying gold, one doesn’t have to worry about gold being sued for lack of following environmental standards. Of course, there can be an upside as well, with stocks at times having a better return that gold, with some companies even paying dividends.


About The Author

Scroll to Top