In the middle of last week, large cap stocks fell to the point where they may show losses for 2010. Gold is an asset class that has been much more resilient over the past ten years. Last Friday, it was trading at $1,213 per ounce. The SPDR Gold Trust usually trades at one-tenth of the ounce price of gold. It is up 10.7 percent since the start of 2010, while the S&P SPDR has lost 1.7 percent.
Uncertainty regarding global currencies and their future values, fears of an expanding war, and worry about geopolitical upheaval have helped the price of gold during the past decade. The precious metal has experienced a 400 percent increase from year 2000 levels. Though people may now fear these high gold prices, experts say they should not.
Scott Nystrom, Congressional Budget Office employee turned professional investor, is one of the folks saying there is no reason to fear. The Federal Reserve is predicting lengthy periods of weakness and preparing to create more money. Mr. Nystrom points to this “tidal wave of new money” as the factor that will cause the price of gold to climb even higher.
He recommends that investors purchase stocks in several gold mining companies. Conservative investors will be drawn to Barrick Gold, a Canadian mining company with a market capitalization larger than either Newmont Mining or Goldcorp. It has a stable history of production and several new South American mines set to begin production.
Barrick Gold is currently trading at $43 per share and yields 1.1 percent. Mr. Nystrom believes that the share price will continue to increase with the rising price of gold and new production at its Pascua Lama mine in Chile. As the Federal Reserve ramps up to pump more money into the economy, the value of this currency will decline against commodities such as gold.
Source: Dobosz, John. Forbes.com. Golden Time For Miners Like Barrick.
Tags: gold investments, gold mining stocks, Gold News, investing in gold