Gold is on a tear this year.
Since the start of the year, the precious metal has outperformed the S&P 500 by 20%.
The price has entered into a strong long-term trend, so there is still plenty of upside potential.
I have my end-of-the-year price target set at $2,200 per ounce and believe we will reach $2,500 in 2021.
As it turns out, however, I’m perhaps too conservative with my estimates.
Yesterday, Bank of America came out with its price target for 2021, which they’ve set at $3,000.
They believe gold will appreciate by another 69% over the next 18 months.
That might sound like a bold prediction, but given the excessive money printing and economic risks, I wouldn’t be surprised for it to materialize.
Even if you go with my conservative estimate, either way, the case for gold remains strong.
So, given the bullish outlook, let’s look at some ways you can profit from it.
How To Bring Down The Costs Of Holding Bullion
Typically, the first gold investment people think of are gold bars, what we call bullion.
This is the most straightforward solution, but it comes with its own set of challenges.
The first one is how you’re going to store it and what the cost of that will be. And the second one is the buying and selling process, which takes time and is again associated with fees.
A simple way around these issues is to buy a gold bullion ETF (Exchange Traded Fund).
These funds hold an equal amount of gold bullion in secure vaults as the value of their shares on the market.
Therefore, by buying a share in such a fund, you’re getting the right to an equal portion of gold stored in those vaults.
And since these funds charge management fees which, on average, don’t exceed 0.5% per year, and you can trade them anytime you wish, you’re eliminating all the hassle associated with holding physical gold bullion.
Three such funds you can turn to are SPDR Gold Trust (GLD), iShares Gold Trust (IAU), and Aberdeen Standard Physical Gold Shares (SGOL).
Mining Companies Are Raising Their Dividends
Another option is to invest in gold-mining companies.
The benefit here is that the value of these stocks appreciates exponentially as the price of gold increases.
Moreover, during gold rallies, the miners start paying much of their revenues back to shareholders in the form of dividends. So, this option gives you the ability to earn income as well as profit from capital gains.
We’re at an inflection point right now, with some miners already increasing their dividends, so this is an excellent time to be a buyer.
I include three gold miners, which I see as the best in my True Retirement Wealth portfolio, so feel free to check them out by following this link.
The only downside is the operating costs, which are linked to the price of oil. So that’s something you always have to watch for.
Fortunately, oil prices now are low, and there’s little indication that they could run out of hand in the near future.
A Simple Solution To Diversify Gold Miners’ Risks
The third and final option is royalty and streaming stocks.
These companies supply the capital to gold miners in exchange for a percentage of production from that mine.
That way, they can profit from the mine, without having to operate it. This comes in handy when oil prices are high, since this doesn’t affect royalty and streaming companies’ margins the way it does with miners.
Moreover, by using that approach, it’s easier for them to diversify across mines. So if one isn’t performing as well, contracts from the others can offset any potential losses.
Three stocks from this sector that I like are Wheaton Precious Metal (WPM), B2Gold (BTG), and Franco-Nevada (FNV).
Good investing,
Leon Wilfan
