Gold Mining Shares
Experts always recommend investing in gold shares
, because gold never depreciates and cannot be destroyed by inflation the way cash can. Some see gold as an investment mechanism. However, buying gold equities will give you leverage over the increasing price of gold
. The rising price increases the profits of gold mining companies, and the price of shares goes up as a result.
Now that you have decided to buy gold mining shares, how do you decide on the company? If you are to buy gold mining shares, you have to allocate some funds. When deciding on the amount of money to allocate, there is a rule of thumb: 10 or more percent of your portfolio should consist of precious metals. Because it is riskier to invest in some exploration companies, mining shares should comprise less than half of the allocation for precious metals.
You should know that there are three types of gold manufacturers – big, medium-sized, and small. Small-time producers, also referred to as juniors, produce less than 200,000 troy ounces in a year. Medium-sized producers manufacture between 200,000 and one million ounces, and the big guys produce over a million a year. For some investors, the portfolio consists of the gold shares of a single large-cap company. Such companies usually offer slow but safe growth, together with a safe dividend. To minimize company-specific risks, other investors diversify their portfolios, but some invest in young exploration companies. Such investments carry risk. Junior minors have considerable amounts of debt, taken out to begin production. Investing in ETFs and mutual funds specializing in gold mining shares is another option.
The best-known “big guys” are Harmony Gold
, and Barrick Gold
. Based in Vancouver, Canada, Goldcorp expects to reach an output of 3.5 million ounces in the next five years. In 2008, the gold giant’s revenues peaked at $1.54 billion. The company was founded in 2000 following a merger between CSA Management and Goldcorp Investment. Three years later Goldcorp bought a million shares in Geoinformatics, a mine exploration company. With time, they acquired the Canadian Virginian Gold Mines Eleonore, almost half of the Porcupine mines in Ontario and about a third of the Musselwhite mines. They currently operate 18 mining locations. One of them holds among the richest gold resources in the world. This mine, located in Canada, produces 700,000 ounces a year all on its own.
The Barric Gold Corporation holds around 10 percent of the international gold market. Their revenues totaled $642 million in 2008. The company’s shares are listed both on the New York Stock Exchange and the Toronto Stock Exchange. They operate mines in dozens of countries around the world, including Australia, Canada, Peru, and the United States. The corporation is based in Ontario, Canada. Their gold reserves total 19.5 million ounces.
Gold mining shares can be sensitive to market changes. However, considering that gold is relatively resistant to inflation and deflation, investing in gold stocks
can give you a major advantage on the market, especially since few market players really know how to make money this way. It has been reported that gold mining shares are lifting the Canadian market. Considering that most of the big players in this field are from Canada, we can expect this to be a very good way to overcome the economic crisis.
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