Justin’s note: All month, we’ve been sharing the top insights from Strategic Investor editor E.B. Tucker. If you haven’t yet, make sure to check out his recent essays on legal sports betting and America’s new energy shift… and how they can help you make a fortune in 2019.
But those aren’t the only trends on his radar…
You see, E.B. is also a true gold expert. Before working in the newsletter business, he co-managed a precious metals equity investment fund. Today, he serves on the board of a successful gold company. In short, he has deep connections in the gold business. And he’s helped his readers book big gains from some of the industry’s most explosive stocks.
In fact, one of his picks in Strategic Investor just shot up 28% in one day.
And recently, E.B. showed us why he thinks gold prices are going to rip 22% higher this year. In today’s essay, he explains how you can use a rising gold price to book big gains…
By E.B. Tucker, editor, Strategic Investor
Regular readers know that I think gold prices are headed higher in 2019.
Today, I want to show you an easy way to take advantage of this trend.
I’m talking about buying gold stocks.
Gold stocks aren’t much different than any other type of stock. They just happen to be shares of companies that produce gold.
These companies mine the ore that contains the metal and sell it to refineries. The process is similar to oil or any other natural resource in the ground.
The reason why gold stocks perform better than gold is simple: They offer leverage to the gold price.
That’s why the returns can be spectacular.
Let me explain…
The Power of Leverage
The word “leverage” usually means borrowing. That’s not the case at all in the gold market.
If you aren’t familiar with the concept of leverage in gold stocks, here’s a quick example of how powerful it can be…
Say the price of gold rises from $1,300 to $1,400. That’s roughly an 8% gain. If you own physical gold, you’re up 8%.
Now, say a mining company owns a million ounces of gold in the ground, and gold is trading at $1,300. The value of the gold in the ground isn’t simply $1.3 billion (1 million ounces x $1,300/oz.). Instead, the gold in the ground is worth much less than that, because it will cost a lot of money to extract.
Say it costs the company $1,250 per ounce, all-in, to mine the gold. At a gold price of $1,300, the company has a potential profit of $50 on each ounce of gold.
However, if the price of gold rises only 8% to $1,400, the company’s profits per ounce increase by 200% ($1,400 – $1,250 = $150 profit per ounce). This small move in gold can cause the stock price to increase 40%, 50%, or more. This is why a small increase in the price of gold can cause a gold stock to soar many times that amount.
It’s happened before…
A History of Gold Market Booms
Below are the historical returns for gold producers during four separate cycles when gold boomed: 1979-1980, 1981-1983, mid-1990s, and 2001-2006.
These are not hypothetical returns. They are real.
First up, the king of all gold bull markets: 1979-1980…
Gold more than tripled during this period. But gold stocks more than quadrupled.
|Returns of Producers From 1979-1980|
|Sept. 1980 Peak||Return|
|Campbell Red Lake Mines||$28.25||$94.75||235.4%|
|Giant Yellowknife Mines||$11.13||$39.00||250.4%|
This wasn’t the only time gold stocks soared…
From 1981-1983, gold producers returned over 70% on average. And this happened in less than two years.
Gold stock Campbell Red Lake Mines climbed over 120%. This stemmed from a mere 10.8% rise in gold.
There was another boom in the 1990s. The average gold producer went up more than 200%…
Cambior rose 124%. Kinross Gold returned more than 190%. And Manhattan Gold & Silver skyrocketed over 760%.
All while gold only rose 8%.
Then, another big boom hit from 2001-2006. This one rivaled the boom of the early 1980s.
Gold returned 158%, while the average gold producer gained over 400%.
Newmont shot up 270%. Gold Fields soared over 500%. And Goldcorp returned over 800%.
As you can see, an increase in the price of gold (even a small one) can lead to huge returns.
And We’re Seeing This Play Out Today
Gold is on the rise again… and gold stocks are up even more.
From September 2018 through the end of January, gold has risen 10%.
Meanwhile, the VanEck Vectors Gold Miners ETF (GDX) – a fund that invests in a basket of gold mining stocks – is up 30%.
As gold prices rise, the best gold stocks stand to continue to soar much higher.
If you haven’t yet, consider adding gold stocks to your portfolio.
Just remember, gold stocks are extremely volatile. Like in any industry, the stocks of stronger companies will go up more than those of the weaker ones. As always, never bet more money than you can afford to lose.
It only takes a small stake in the right companies to make a fortune as gold prices rise.
Editor, Strategic Investor
Justin’s note: You can gain access to E.B.’s top gold stocks – and all of his boots on the ground research – with a subscription to Strategic Investor. Sign up today right here.
And if you enjoyed today’s piece by E.B., you’ll want to mark your calendars for February 27. That’s when E.B. will share the details on his latest venture. He’ll be revealing the top strategy he uses to make money in today’s volatile market. This is a truly unique opportunity to learn about a strategy you can use to generate gains 10x bigger than options.
We’ll be sharing more details in the coming weeks. We’ll also share E.B.’s top insights so that you’ll be prepared for the big night. Stay tuned…
Doug Casey’s thoughts on the crisis in Venezuela sparked mixed reader feedback…
How dare we butt into Venezuela, and then the market makes good on it? How awful.
This is all trumped up… for the oil…
Greetings, Doug. Just read your musings on Venezuela. As always, you bring a very interesting point of view to the continual crisis that happens to be going on around the world.
I do have to say, that despite your keen observations concerning the present state of Venezuela, and what appears to be another disastrous “invasion” by the U.S. on yet another poor country, of course all in the name of bringing down an evil dictator, and saving the poor people there by placing hard sanctions upon them – it seems in the end, your only real interests in the upcoming disaster, with the U.S. empire’s bloody and destructive hands all over it, are the opportunities savvy investors can possibly obtain from the destruction and mayhem that will follow an American-created coup there.
The Venezuelan people want Maduro. The U.S., with another puppet in their empire madness, want the oil and gold. They are corrupt and will kill to achieve their aims, just like Iraq, Iran, Vietnam, etc., etc., Japan with the atom bomb. They have no regard to whom suffers, dies. Even their own military, that has been proven for many, many years. Someday, it will all end when the American people wake up.
Same sh*t two generations later. Remember Vietnam? 50 years ago? Corruption at the end was just as much as Venezuela money wise.
Doug has shown he’s a bigger idiot than Maduro. He’s totally ignorant of the real situation in Venezuela. Thank God we live in this country that you morons despise and talk down. Under Maduro no one has freedom of expression. You would be hunted down tonight and murdered in front of your wives and children for saying things derogatory to this tyrant or you would be thrown into prison and tortured by his assassins. I feel sorry for those who are ignorant that don’t know what they’re talking about and the idiots that listen to them.
Make sure to share your thoughts on Doug’s latest interview at [email protected].
This isn’t something you’ll hear about from the mainstream media…