Investing in Gold with a Spot Price Near its Record—Time to Buy High & Sell Higher

In turns out that gold stocks are resuming their upward price trend in an environment where the spot price is ticking close to its all-time record. Gold stocks are the place to be if you’re a stock market speculator and if you believe that investing in gold will be fruitful in a slow growth environment. Nobody can with any real expertise predict where the spot price of gold will trade in the future, but all the fundamentals continue to line up.    In turns out that gold stocks are resuming their upward price trend in an environment where the spot price is ticking close to its all-time record. Gold stocks are the place to be if you’re a stock market speculator and if you believe that investing in gold will be fruitful in a slow growth environment. Nobody can with any real expertise predict where the spot price of gold will trade in the future, but all the fundamentals continue to line up.    In turns out that gold stocks are resuming their upward price trend in an environment where the spot price is ticking close to its all-time record. Gold stocks are the place to be if you’re a stock market speculator and if you believe that investing in gold will be fruitful in a slow growth environment. Nobody can with any real expertise predict where the spot price of gold will trade in the future, but all the fundamentals continue to line up. Investing in gold is something that I really believe in.

Gold stocks and investing in gold are the same thing as buying a future stream of earnings from a regular business, except the underlying asset can fluctuate significantly in value, thereby making or breaking the business model very quickly. Gold stocks have a lot of strength these days and it’s a trend that’s been building for a number of years. Stock market investors were recently presented with an opportune entry point for new positions in gold stocks, as the sector was much in need of a correction (see What the Investor Sentiment Shift Means to the Commodity Trade). While investing in gold might be just a sideline strategy for most investors, there is a lot of technical strength in gold prices today.

Investing in gold makes a lot of sense in the current environment, even as spot gold prices are near record highs. If the euro currency comes apart, gold will rally. If the euro doesn’t come apart and the sovereign debt issue improves, gold will rally. It can do so on a weaker dollar; it can do so based on rising core inflation. There are just so many reasons why the price of gold can stay strong and rally even further as we move into next year.

If you have experience investing in gold, then you know that gold stocks move commensurately with the underlying price of the commodity. This is unavoidable, no matter what the trade (inverse ETFs or derivatives excluded, obviously). Gold stocks are based on the underlying commodity price and, with this reality, price momentum is very meaningful. If you thought the trend was your friend in the stock market, history shows us that it’s even more pronounced in commodities. That’s the attractive part about investing in gold at this time; there’s very little price momentum anywhere else in the stock market.

Of course, investing in gold today isn’t without its risks. A good trading opportunity just came and went when the spot price corrected. But this is a stock market that remains very unsure of itself and I’d rather be investing in gold near price highs than trying to buy low and sell high in other sectors. Gold stocks are the place to be for the next several years. As long as there is too much debt and rising inflation (due to huge increases in sovereign money supplies), gold stocks should pay.