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Thursday, May 19, 2016

Could Some Forms of Gold Investments Be Better Than Others?

Why does this writer hate some forms of investing in gold, but love others? The rationale is even more simple than you may think.

Writing for MarketWatch, Cody Willard recently examined the various forms of exposure to gold and how they bode for the average person looking to protect their savings. For his part, Willard believes the best course of action is to stick to coins and bars and avoid stocks, ETFs and the like – regardless of the potential for short-term profit.

Willard writes that the issue with mining stocks is one of debt: Most mining companies are currently working under massive debt and are therefore dependent on higher gold prices. Everyone involved in gold likes high prices, but the miners absolutely need them; Willard explains that miners aren't able to profit when gold stays in the $1,100 range, and that they require prices to be at least over $1,300 in order to be profitable.

Likewise, gold ETFs do little to fix the problem of uncertainty. In the event of a crisis, these funds could very well be unable to deliver the gold they owe to investors – in fact, many believe that precious metals ETFs are already operating on good will and lack the physical gold that they purport to have.

For Willard, gold is all about certainty, so investing in the metal should serve as a hedge against the long-term risks of currency devaluation and other forms of central bank disruption, not bring more risks to a portfolio.

Looking towards the future, Willard believes that gold prices will hit $2,000 per ounce sometime in the next decade. Furthermore, he expects the Fed to formally enter an easing cycle again in the next few months, which could act as a tipping point for a 20-30% spike in gold prices, if not higher.

Is the dollar's dominance in jeopardy? Could other currencies achieve reserve currency status? Find out here.

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