How to Profit from Gold Stocks

Warren Buffett famously said: “Be fearful when others are greedy, and greedy when others are fearful.”

Very few investors get this message right. They often do quite the opposite, letting emotions get ahead of logic. After all, it takes guts to buy when everyone is selling.

Yet, fortune favors the bold, and there is a way to use Buffett’s mantra to increase the odds of winning in the investing game.

You just need to know which sector is undervalued and well-positioned for growth.

It isn’t easy at a time of extreme volatility when the global economy is on the edge of a potential recession.

But we can use the market’s fear to our advantage, and gold will help us here.

In this article, we’ll show you why you need to pay attention to gold and why you should do it now. And we will share with you how you can take full advantage of rising gold prices. closely follows macroeconomic trends, the mining industry, and the gold space. These help navigate markets and spot investing opportunities as they arise.

Right now, we see a great setup for potential gains in gold stocks.

How to Profit from Gold Stocks


The Ultimate Safe Haven Asset

It has become an established pattern: gold performs best during crises.

Most investors know that, or at least have heard of it.

Analysts at Schroders, an asset manager, confirmed this theory. Their research showed that during the last seven recessions since 1973, the price of gold gained 28% on average.

While major stock indices such as the S&P 500 were falling, gold held steady and even gained in price. During the same periods, gold outperformed the S&P 500 by 37 percentage points.

On average, those who invested in gold during recessions ended up with gains, as opposed to those who went all-in on broad stock markets.

That’s a spectacular result during extreme market volatility, and we believe this time will be no different.

The European Union has officially entered a recession. On the other side of the Atlantic, the Fed started admitting that recession is inevitable. The central bank’s economists say:

“Given their assessment of the potential economic effects of the recent banking-sector developments, the staff’s projection at the time of the March meeting included a mild recession starting later this year, with a recovery over the subsequent two years.”

Things didn’t get much better since then. Yes, inflation is headed lower, but unemployment is rising. We firmly believe that the recession in the US is still on tap this year, and investors still have enough time to align their portfolios with this forecast.

Gold Stocks Take Advantage of The Metal’s Positive Outlook

You can take advantage of what we see as a long-term bull market for gold via physical metal or some funds backed by gold. Both track the price of the metal well, but there is another way to leverage this trend.

It doesn’t involve complex trading strategies, options, or borrowed money. No need to worry about margin calls, setting special accounts, or worry about any potential tax complications.

We’re talking about investing in gold mining stocks. These companies work in the gold space, mining, developing, or exploring for gold around the world.

Most of these stocks are listed in Canada. The country is home to mining companies of all calibers.

But don’t be confused. These Canadian gold mining companies are working in other countries, too. In fact, you can find miners from Canada in the most remote corners of the world, such as Chile or Botswana.

These companies are trading on Canadian exchanges, but most of them are also cross-listed in other countries (like the United States, Germany, Australia, and others). This makes it easy for foreign investors to access them.

These gold stocks often multiply the gain of the underlying metal. And that’s why we see these companies as the ultimate investment vehicle in the gold space.

During the same seven recessions that happened since 1973, gold stocks gained 61%. They earned two times more than gold itself did.

That’s why we believe once the world enters a recession, gold will serve its purpose of preserving investors’ capital. And if history is a guide, gold stocks may outperform gold itself.

However, this window won’t last long. After the recession does its damage, we’ll likely see the gold price retreating, and it will be the best time to take profits.

And this is how we can utilize Warren Buffett’s investing rule right now. “Buying low” while the gold and related stocks are selling at low valuations, and “selling high” when the economy is back to normal.

You can invest in gold stocks in bulk via ETFs (exchange-traded funds). These two ETFs are household names in the gold space:

  • VanEck Gold Miners ETF (GDX) and
  • VanEck Junior Gold Miners ETF (GDXJ).

Or you can be more selective and pick individual stocks.

To learn more about select gold stocks, visit Thier team provides timely updates on the latest developments in the gold sector.

However, while potentially rewarding, gold stocks are risky. Don’t invest more than you can afford to lose, and always diversify your portfolio.