Think about this for a second. 2020 is the first year since 1979 to have both Gold and the S&P 500 mark new highs during the calendar year.
What does this mean and what can these new highs of both the major indexes mean?
First it’s saying asset prices are going up because the Fed is buying assets with printed money while rates are very low.
An example would be if you have stock in a company that makes commodities, with rates so low the market is willing to pay for that yield. So that’s the reason the stock market is up.
The reason gold is up, the market isn’t sure how all this is going to play out since the buying of assets with printed money is dangerous from an inflation perspective, so the question is what’s going to happen to other goods.
People are buying gold now as a hedge against broader consumer inflation.
This pans out to having equities being relatively cheap because it is all about interest rates and the potential return you get for buying those stocks.
Again with interest rates being rock bottom, if you buy Proctor Gamble you get around 2-2.5% yield.
This is cheap for a steady stream of income. Another plus is they pay dividends and owning bonds at this same time would give you a negative.
Even if you’re in Apple or Netflix or some other big companies, they will do well because they have access to capital and they will be able to do better than many small companies that don’t have access to as much capital.
Another thing is the smaller company’s capital might be more expensive.
So large companies that are growing and pay dividends are an excellent place to be if you’re going to play the equity market.
What About The Mining Stocks?
For gold mining companies, we want to look for companies that have the best assets in the world along with the best management. Look for companies that also are trading at reasonable valuations.
Putting all that together means you find a company that’s generating a cash flow and paying dividends to shareholders.
In the past several years, we’ve seen the trend of more and more mining companies paying dividends. Shareholders started expecting it and as the mining companies complied, it’s become an ongoing norm in the mining stocks.
After 2013, when mining stocks got slammed, these companies curved back expenses, optimized their operations and slimmed down drastically. This lesson learned is paying off for shareholders today.
One thing that got the mining companies into trouble years ago was during the strong bull market they started building mines all over the place. This isn’t happening this time.
What Gold Stock Is The Best?
It’s safer to hold a bigger position in a diversified company that generates free cash flow from mines all over the world, than to have a junior that produces from only two mines in a single country.
The risk management would be more in the latter, so if you have the tolerance and time to stay abreast of the companies go for both because currently there’s value across the board here in late 2020.
How About Gold vs. Silver?
It looks like gold is the way to go in the longer term. If for some reason a recession comes about in 2021 gold will be the beneficiary and not silver.
There are significant cash flows into the gold market consistently in late 2020 and seems like a big trend lately.
Is Bitcoin A Good Investment In The Last Quarter Of 2020?
The crypto space seems to to be dying down a little. It seemed to be a creation of something out of nothing, with speculation for lots of people to become multi-millionaires.
This is on the slow down now. Governments are reluctant to tie their currencies to bitcoin instead of gold, which is an important point to know about the mining business down the road.
What Is The 2021 Forecast For Gold?
There was a run-up close to 2,100 and then a bit of a consolidation taking a little down.
The gold price forecast for end 2020 is USD 1,900 per ounce (was USD 1,700 per ounce). Our new gold price forecast for end 2021 is USD 2,000 per ounce (was USD 1,800 per ounce).
The bank’s analysts continue to expect gold to reach $2,000 per ounce in the first half of 2021.
To see the current price of gold go here: Gold Price org.
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