After 11 years of positive returns, can gold continue to shine? That’s the question put to me last week by my friend and Bloomberg TV host Pimm Fox.
My answer? Yes, because the Fear Trade and Love Trade remain firmly in place.
Regarding gold stocks, I explained that we look for miners who can demonstrate high margins and possess an exceptional growth profile. From a bottom-up perspective, we look at cash flow (essential for funding growth, capital expenditure and dividends), production growth (percentage change from previous quarter/year), and reserves per share (how much proven reserves does the company have?).
The show’s other guest, Tom Russo from Gardner, Russo & Gardner, made some interesting points regarding the agility of gold as an investment. Russo said, “What I find so amazing about gold over the past three years is how flexible [gold] has been as an asset class. It answers every investor’s question. If someone looks for a political risk investment, it’s gold because you can carry it with you, you can flee with it. If someone wants protection against inflation, it’s gold because it will hold value against inflation.”
It’s this agility that should continue to attract attention from gold investors around the world.
Important Update: The 2012 edition of our popular Periodic Table of Commodities is now available. Click here to download the pdf. We’ll dive into further detail on the table next week.
Gold, precious metals, and precious minerals funds may be susceptible to adverse economic, political or regulatory developments due to concentrating in a single theme. The prices of gold, precious metals, and precious minerals are subject to substantial price fluctuations over short periods of time and may be affected by unpredicted international monetary and political policies. We suggest investing no more than 5% to 10% of your portfolio in these sectors.
The following securities mentioned in the interview were held by one or more of U.S. Global Investors Fund as of December 31, 2011: Randgold Resources, Franco Nevada, Royal Gold.
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Disclosure: I am long RGLD, GOLD, FNV.