One Way to Trade a Rising Gold Price…

One Way to Trade a Rising Gold Price…

I am fives days into my working year, and I’ve already spent four of them talking about gold.

This was not how I planned my week.

Initially I was going to write about gold on Monday, and then have Jim contribute his gold insights on Wednesday.

The two other topics I wanted to cover was looking for alternative incomes in a low interest rate world (has anyone ever thought of bidding for music rights?).

And retail.

In less than two weeks, three Aussie retailers have tanked.

Long-time readers know that next to gold, retail is my jam.

I love nothing more than analysing consumer behaviour and showing people how crucial this sector is to picking up economic trends in advance.

But after gold cracking US$1,600 this week, some tit for tat bombing on the other side of the world, gold is the metal that won’t quit the headlines.

So just what do we do with this information?

Another way to play the rising gold price

If you’re new to physical gold, click here for a free guide for all you need to know about the yellow metal.

But given that gold is in all the headlines now, does that mean the rally is over?

The yellow metal’s best gains are behind it?

Nope. Not at all.

Sure gold rallied 18% over 2019.

Plus the yellow metal is up over 40% since late 2015, the gold price has years left to run. On Wednesday Jim wrote that he reckons it could reach $14,000 in the coming years.

The thing is gold might ‘feel’ like it’s in the news.

The reality is the mainstream rarely give the metal much attention.

Other than reporting surprising daily gains or losses in reaction to an event, it doesn’t get much more of a mention.

It’s because of this scant attention that I set up my brand-new service, Rock Stock Insider.

It’s here that I speak to global authorities on the precious metal. The goal is simple. Help investors understand why gold matters and then interview experts from all over the world to to help give investors a bigger picture on what’s really going on.

In saying that, a rising gold price will draw attention to gold miners.

And Australia is home to many of them.

We are the world’s second largest producer of gold, pouring some 321 tons over 2018/19.

Meaning a rising gold price will see some of miners increase their profits as the gold price goes higher.

That’s important to note, as gold miners tend to follow what’s happening with the gold price.

Check this out…

Aussie dollar gold price versus Van Eck Vectors Gold Miners
(Daily/yearly chart)

Source: Bloomberg

The black line is the Aussie dollar gold price.

The orange line is the Van Eck Vectors Gold Miners ETF [ASX:GDX], which has slightly outperformed the Aussie dollar gold price in the past year.

GDX aims to replicate the NYSE Arca Gold Miners Index [NYSEArca:GDX], which in turn aims to track the performance of globally-listed gold producers.

The weighting of GDX is biased towards gold mining stocks in Canada (52.3%), Australia (16.1%), and the US (17.5%).

The remaining 14.1% is based on gold mining companies located in South Africa, Peru, China, Monaco, and the UK.

However, you’ll notice GDX is much more volatile than the physical Aussie dollar gold price.

This is because GDX is based on gold miners around the world.

Essentially, GDX is a mashup of international company share prices plus various currency movements.

Not only that, the underlying basis for GDX are the world’s biggest gold mining companies.

Here, companies like Barrick Gold Corporation [NYSE:GOLD]Newmont Goldcorp Corporation [NYSE:NEM]Newcrest Mining Ltd [ASX:NCM], and Franco-Nevada Corporation [NYSE:FNV] are all major constituents of GDX.

Part of the surge for GDX in 2019 can be attributed to the Barrick Gold-Randgold and Newmont-Goldcorp decisions to merge.

Remember, if you choose to invest in GDX, it’s essentially an easier way to gain exposure to individual gold miners.

As for individual Aussie-listed gold miners? Well, that’s my bread and butter.

The details behind the bet

The whispers are true.

I am part of the biggest battle of the year. A career make or break perhaps?

As I explained yesterday, Tony Locantro (a stock broker) and I have put our egos skills to the test.

As a stock broker, Tony regularly recommends certain gold companies to his clients.

However on the other hand…over at my premium service Hard Money Trader, I recommend microcap gold stocks to punters.

The tiddlers. The bloke, a shovel, and a patch of dirt type of stocks.

You know, the sort of super risky high stakes, teeny-tiny gold stocks.

The type that could blow up your portfolio…or return potentially triple-digit gains.

Like I said, these are super risky types of stocks that I suggest to subscribers.

But here’s the thing.

Hard Money Trader subscribers pay an awful lot of money for that kind of analysis. And some of the companies I have chosen may become recommendations to them later in the year when the time is right.

So while I love a bit of banter, I’ve made the decision to keep my picks between myself, Tony, and the organiser of the Gold & Alternative Investment Conference (GAIC).

There are very specific reasons I have chosen these companies. The results and my reasons will be revealed on stage at GAIC in August this year.

Remember Tony and I are having a bit of fun.

Essentially arm-wrestling each other from each side of the country.

Until next time,

Shae Russell Signature

Shae Russell,
Editor, The Daily Reckoning Australia