You can buy precious metals stocks in several ways. These include Insider buying, Growth, Momentum, and Value. The key is to choose the right type for your investment strategy. Here are some examples of good precious metals stocks.
Before you begin, you may want to know the federal laws and regulations regarding buying precious metals. The Federal Trade Commission has made a list you can read here of facts and guides regarding the matter. Look over them carefully as this information is invaluable when making your final decision.
Value
Precious metals are both attractive investments, but their prices differ widely. Although the former is stronger than the latter, bullion is poised to continue rising in the near future. We’ve recommended two silver-related stocks to our subscribers. If the metal breaks the $30 level, silver will be off the charts. And while it is likely to continue rising, silver may prove to be a better performer in the long run.
The most important thing to look for in a bullion stock is a company’s free cash flow. If the company is producing it, it should be profitable, or at least have a positive free cash flow. If it’s not, you’ll need to move on. It is also important to look for a company with a large free cash flow because that’s a sign that the metal is overvalued.
Historically, the bullion-silver ratio was fifteen to one, but it has recently surpassed that mark. The price difference is partly due to different mining characteristics, as silver is often a byproduct of other mines, and it’s important to remember that silver companies don’t earn much free cash flow. Nonetheless, it’s important to remember that the gold-silver ratio isn’t nearly as volatile as stocks, so the relative prices of the metals aren’t necessarily related to one another.
Insider Buying
While insiders may be buying stocks for a variety of reasons, it is important to note that this can be an indication of overreaction to recent news. If the buying is by an insider, it could be a good value opportunity for Wall Street investors. If the buying is by an insider, it is probably a good time to buy. Even if you’re not an insider, you should still take action.
Investors are often attracted to the idea of being “inside” bullion bugs. This type of investor typically collects physical bullion bullion and allocates a significant portion of their family assets to it. While downtrends can discourage this type of investor, they eventually weed out the less ideological players. The vast majority of bullion bugs are retail participants.
Growth
The rebound in the price of precious metals has been significant. In fact, stocks across the sector soared today on the rebound in bullion prices. As a result, investors have been re-investing in these precious metals, and they are able to reap the benefits of this uptick as well. But the recent uptick is not a guarantee of profit, and diversification is not a cure-all against losses in a declining financial market.
While many investors dread the prospect of a decline in the price of bullion, recent economic data suggest that demand for the metal is on the rise. Investors are looking to safe-haven metals like precious metals to offset the risks of unstable financial markets. In the first quarter of 2022, gold demand rose 34 percent year-over-year.
With energy prices at record highs and Russia’s invasion of Ukraine disrupting fragile supply chains, it is easy to see why the price of precious metals has sky-high prospects.
Unlike gold, silver’s price is tied to the strength of the economy. Silver stocks have historically enjoyed more stability than gold, and may even increase further in the months to come. And while gold is stronger and may outperform silver in the near-term, silver is poised for greater long-term gains. Silver has always been attractive to investors, as it is considered the “poor man’s gold.”
Momentum
There is a lot of optimism surrounding precious metals, as both are at seven-year highs. A number of investors have been pouring money into the metal as fear of a global slowdown and expectations of looser monetary policy have rattled markets. Meanwhile, assets of bullion-backed exchange-traded funds have reached record levels and money managers are positioning themselves for a bullish bet.
But how do you know when precious metals are headed for a breakout?
In the US, the shift from short-term momentum to mean-reversion became permanent around the year 2005. This change in the market structure is not a simple one. In the US, it can be attributed to the rise of professional money management in the 1970s. The UK has some of the oldest asset management companies in the world.
Opportunity Cost
The recent 25 basis-point interest rate hike in the U.S. took a huge toll on the price of physical precious metals. Gold stocks tumbled as much as 5% on Wednesday. This is not a surprise, however, since the opportunity cost has been working in gold’s favor for years.
Essentially, the concept of opportunity cost is the act of passing up a near-guaranteed return for a higher one. Gold is often considered the ultimate safe-haven, but the U.S. dollar is more liquid and is often considered a better insurance policy. When it comes to investing in precious metals stocks, you are effectively taking a leveraged bet on the prices of the yellow stuff and the price of silver.
Remember that gold is a physical asset and as such, needs to be kept safe. If you’re in need of gold vault storage options thankfully there are several different options, depending on your seller. Opportunity costs are inherent to all investment decisions, and they can be extremely damaging if they aren’t understood and properly managed.
Investors in precious metal stocks should be aware of the current reserve readings of the various precious metals. These readings serve as roadmaps to investors and help determine the profitability of a particular mine. This will determine whether the company can replace its existing reserves or even build more.
