Anyone who invests in gold mining stocks must have a high risk tolerance. Or be completely crazy!
Gold mining might be the most difficult business to operate. For one thing, expensive exploration and infrastructure builds must be undertaken first. Only then can profits roll in.
Given the high risk, why are investors fascinated with gold?
All things considered, a couple of reasons stick out:
- Gold is legit money used for centuries
- Limited supply
- Divisible (fungible)
- Insurance against a currency crisis
- Insurance against a debt crisis
COVID-19 Boosts Gold Mining Stocks
The COVID-19 pandemic has the potential to wreak havoc. In response to COVID-19 governments went on a spending spree. At the same time, we have no idea when responsible spending will return.
In response to the crisis, the Federal Reserve initiated QE to infinity. As a result, the Fed can now buy all the US treasuries with their printing press. It appears debt can be created without consequence.
Not surprisingly, a lot could go wrong with creating this much debt.
In the long run, gold mining stocks could prove to be great protection against this nonsense.
Gold Mining Stocks Are Not Created Equal
Gold mining stocks risk levels:
- Junior explorer/exploration stage
- Producing mines
- Gold streaming and royalty companies
- Gold bullion/coins
In the end, you need to decide what risk level fits your goals.
My Top Rated Gold Stocks
Given the high level of risk that comes with investing in gold stocks, needless to say I like to reduce my risk as much as possible.
Gold stock investing involves a ton of risk. Therefore, the reward should be fantastic! As a matter of fact, I prefer gold and silver streaming companies and dividend paying gold stocks.
This duo provides exposure to the price of gold and spins off cash flow with reduced risk. A win-win for the level of risk assumed by gold stock investors.
Do you want to learn more about gold and silver streaming companies? If so check out this post.
