You know, this gold bug thing isn’t going away. Like I’ve been musing since the beginning of the year, 2006 is definitely going to be the year of the precious metal. I’m reading research reports, quoting many gold industry veterans, saying the spot price of gold could very well hit $1,000 per ounce in the not-too-distant future.
Frankly, there is no reason why this can’t happen.
So, a well balanced portfolio will already have a few precious metal picks. Some companies we’ve talked about before include: First Quantum Minerals (a copper play), Goldcorp. (one of the best gold producers on the planet), and Pan American Silver (a top silver play that’s currently really hot). We’ve also talked about a few junior precious metal producers.
Of course, if you haven’t got any precious metal holdings in your portfolio, you’re in a bind because most of these stocks have already gone up dramatically in price. Still, I really do think that the current speculation in the price of gold has real legs for the rest of this decade.
All financial assets experience popularity in waves, and, for many years, a lot of gold industry players were saying that the price is going to go up big time. Of course, the market reaction was mute. Enthusiasm for gold was built slowly and commensurately with the decline in the value of the dollar. Right now, the enthusiasm is building outside of movements in the dollar and there is almost a sense of inevitability in the gold market that the price will continue to appreciate.
If you don’t have the stomach for individual gold stocks, perhaps the best way to play the market is through a dedicated mutual fund. I wouldn’t choose a pure play gold fund, I’d choose a precious metals fund that invests mainly in gold, but also includes companies producing other metal commodities.
I think the price of gold will continue to tick higher, but it will do so like its done over the last few years, slowly and without much fanfare.