Friday on CNBC Representative from Texas Ron Paul didn't hesitate to share his strong opinions on Gold. Paul, who has been an investor in the precious metal for decades, is sticking by his investment.
In the interview Paul went on to say that Gold has been up 12 out of the past 13 years, and that there is still time this year for Gold to make up some of its lost ground. In response to why Gold has been down so far this year, Paul responded by saying that short term price is difficult to predict, but over time short term market fluctuations tend to lose their importance. Paul mentioned that if you look at the record of the value of the dollar since the Federal Reserve has been in existence, you would see a graph going continually down. Over time, Gold tends to maintain its value, as at one time Gold sold for just $20 an ounce. Paul finishes by saying that as long as government has excessive spending; Gold should continue to go up and could eventually to go "infinity" if the dollar collapses completely.
What are the best ways to invest?
The best ways of investing in Gold have been discussed by many different financial professionals, all who seem to have different opinions. Ron Paul, who keeps about 60% of his holdings in Gold or precious metal related investments would recommend gold miner stocks.
Many of Paul's investments are in smaller, microcap miners, but he also owns some larger companies.
Gold Miner Fundamental Analysis:
1.) GoldCorp (NYSE:GG)- GoldCorp has been performing poorly this year. The share price is largely dependent on the price movement of Gold, which has hurt the company. GoldCorp's production continues to improve however. In quarter four of 2012 GoldCorp's production was 633,000 ounces, compared to a current level of around 700,000 ounces. Gold production should continue to increase in 2013, due to the new Pueblo Viejo mine expansion. This probably won't help their bottom line however, as costs are also likely to increase due to the expansion. These shares are certainly not favorable at the moment, but aggressive expansion could lead to a successful future investment.
2.) Barrick Gold(ABX)- Barrick has also been performing poorly, and even recently lost its top spot of the Gold miners to GoldCorp. Like GoldCorp, Barrick Gold has not been able to satisfy investors of late. Increased costs including labor, materials, and energy expenses are hurting the bottom line. Barrick is not looking to make major changes in their production schedule, but are looking to help improve their shareholder satisfaction. Despite the potential for the price of Gold to continue to fall, Barrick is the top Gold miner, and may be worth the investment for a patient investor.
3.) Newmont Mining (NEM )- Newmont Mining is the only US based miner that Paul owns. Although few people are recommending Gold miner stocks right now, Newmont is the only miner that appears to have some positive press of late. Newmont also pays a solid dividend of around 4%. Newmont is expecting to keep production at similar levels as previously reported, forecasting around 5 million ounces again in 2013. Costs are also increasing for Newmont, similar to its competitors GG and ABX. Again, for someone looking to invest in Gold NEM may be a good long term play, but is overall unfavorable in timeliness.
ETFs- The most popular Gold ETF is GLD, which allows investors to get exposure to gold without the drawbacks of storage, insurance, and so on. By investing in the ETF, the financial firm who runs the ETF will be holding the actual Gold. The primary advantage to GLD is that it tracks the price movement of Gold more closely, and has no exposure to labor costs, increased energy costs, and other disadvantages that the miners possess. Management and other variables are also not a factor for GLD. Although the price of Gold has been inconsistent of late, long term inflation continues to be a driving force in the price action of Gold, making it a great hedge for any portfolio. I would recommend GLD for those looking to hedge by investing in Gold.
Gold Coins- Gold Coins allow for an investor to investment smaller amounts of money, as well as be able to hold the physical Gold. Problems for this type of investment include storage costs and theft risks, as well as a potential premium for buying coins from the mint or coin resellers. This investment is best for people who enjoy the physical coins as something to collect, smaller investors, and people who truly believe the dollar will collapse.
Gold/Precious Metal Mutual Funds- One could purchase either a gold mutual fund, or a precious metal mutual fund. A precious metal mutual fund will allow the investor to diversify to include investments other than Gold, such as silver, platinum, and others. Gold only mutual funds may also be an excellent choice for a more conservative investor. Vanguard offers a great low cost mutual fund for Previous Metals, symbol VGPMX.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.