How To Invest In Gold And Silver Stocks

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Gold Etfs And Other Exchange

How To Invest in Gold and Silver Mining Stocks with Jeff Clark of GoldSilver

Exchange-traded products , such as a gold exchange-traded fund or exchange-traded note , can offer exposure to the precious metal, but not all ETPs are alike. Some involve physical ownership of the metal, while others use futures, options, and other investments to attempt to mirror the investment profile of owning gold. If youre a TD Ameritrade client, you can learn more about the available ETPs by using screeners .

Before investing in an ETF, be sure to carefully consider the funds objectives, risks, charges, and expenses. For a prospectus containing this and other important information, contact us at 888-669-3900. Please read the prospectus carefully before investing.

The Unique Risks Of Gold Mining Stocks

But the opposite is also true. If the price of the metal falls, gold-mining stocks may decline by an even greater percentage. Thats because the decline in profitability will have the reverse effect.

In addition, gold-mining stocks are more subject to economic conditions. These can include high interest rates, raising the cost of borrowing, changes in government regulation, the tightening of the credit markets , and even political or labor unrest in the countries where the companies operate mines.

Ultimately, gold mining stocks are much more speculative than the metal itself. While its true they can enhance the return on the gold portion of your portfolio, that increase is hardly guaranteed.

Its even possible that, due to economic factors that affect all businesses, the value of gold-mining stocks may go flat or even decline while the price of the metal is increasing.

As far as silver mining stocks are concerned, theyre less popular than gold-mining stocks. This is in part because much of the silver mining throughout the world is done by companies that mine other metals, including gold.

It will be much more difficult to get a pure play on silver mining stocks than will be for gold-mining stocks.

Buy Silver Coins And Bullion

While not as convenient as investing in silver stocks or ETFs, you can also invest in physical silver. Ranging from 1 ounce to 5 or more kilograms, coins or bullion can be purchased or sold on your own terms from a local dealer or online.

Despite gaining full control over the asset, physical silver is a longer-term investment. Unlike buying and selling stocks or ETFs, where the only cost is the price, there are 3 factors that go into the final amount youll pay for physical silver.

  • Spot price: Like other investments, precious metal prices fluctuate all the time based on supply and demand.
  • Like any retail product, when buying from a dealer, youll pay a markup on top of the actual cost for the silver.
  • Premium: While some physical silver is pretty basic, certain products like coins also have additional value as collectibles. The premium can reflect the age of the silver or the minting authority .

For investors looking to own silver at the lowest cost, junk silver generally comes with the smallest premium. Junk silver is the name for the US dollar, half-dollar, quarter, dime and nickel coins that were minted in 1964 or earlier. The silver content of these coins is typically 90%. Common junk silver coins include the Roosevelt dimes, Washington quarters, Franklin half-dollars and peace dollars.

Pros

  • Can take time to find a buyer for your assets.
  • Involves storing, which invites a risk of fraud or theft.

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How To Value Canadian Silver Stocks

When investing in silver stocks, it is important to assess the following factors by examining the companys audited financial statements and earnings reports:

  • How many producing and/or exploration mines does the company currently have an interest in, and what is its percentage stake in each?
  • What guidance has the company provided on future silver production, and how does it compare to previous periods?
  • Does the company have a healthy and sustainable balance sheet ?
  • Is the company profitable ?
  • Is the company growing ?
  • With this in mind, lets zero in on the top three Canadian silver stocks in order of market capitalization. All three of these stocks are dual-listed on U.S. exchanges as well, making them accessible for investors holding U.S. dollars.

    Future Contracts For Gold Investing

    Gold and Silver Stocks Regain Their Luster, but Will It Last?

    When you buy a future contract you are looking to purchase gold that will be delivered at a later date. Sometimes this is from a gold company sometimes it is directly from the mine. The gold is bought at a set price and delivered later. It does have its downsides as you do have to trust the company to deliver on your gold investment.

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    Investing In Gold And Silver Etfs

    We would not be doing the reader any favors not mentioning a third investment option. This alternative is investing in gold and silver ETFs.

    Investing in these products will be the most similar investment option to buying physical gold and silver coins and bullion. The price of an ETF is directly linked to that of gold and silver. You can find live spot prices on third-party sites, such as Kitco.com.

    The two most popular gold and silver ETFs are the GLD and the SLV. Both offer you an affordable option to gain exposure to the precious metal market.

    However, investing in these products does come with its drawbacks. The first being that you do not have actual possession of the physical gold and silver coins or bullion. Investing in a gold or silver ETF means you have bought into the underlying price of the precious metals and not the actual asset. When liquidating your possession, youll receive the cash equivalent of your investment as opposed to physical metals.

    Highly leveraged ETFs bring counter-party risk. These risks are not present when obtaining gold and silver coins. In other words, if investors lose faith in these paper metals products, your investment could plunge in value well in excess of the underlying metal value of the coins and bullion.

    Buy Stock From Royalty And Streaming Companies

    Another way to indirectly invest in gold is to buy stock from royalty and streaming companies, which are companies within the mining industry that serve as financiers for mining companies that are looking for economic support for exploration and production projects. They then receive royalties on anything the project produces. Investors tend to prefer these companies to straight up mining companies, since they dont have to deal with the logistical risks of running a mining company and can therefore avoid a lot of economic pitfalls.

    But like any other stock, there are still risks associated with investing in royalty and streaming companies, and investors need to do their homework or invest in a specialized fund in order to confidently invest in gold through this avenue.

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    Investing In Gold With Jewelry

    A lot of first-time gold investors decide to start their investments by buying jewelry. Jewelry is very easy to acquire but can also be very difficult to trade in. You need to ensure that you are getting gold that is at least 14 karats. Most jewelry will also have a pretty high markup due to the fact they are pieces of art not investment items.

    Gold jewelry rarely reaches 24 karats because the gold at that point is too soft. You dont want jewelry that will break too easily. When buying jewelry for investing in gold it is often done by looking for some of the most expensive pieces. Besides having a high karat count, you also want it to appear nice.

    Invest In Gold By Purchasing Stock In Gold Miners

    How To Invest in Gold & Silver Mining Stocks

    Investing in the stock of companies that mine, refine and trade gold is a much more straightforward proposition than buying physical gold. Since this means buying the stocks of gold mining companies, you can invest using your brokerage account.

    Some of the most popular stocks in this sector include:

    • Newmont Corp. . Newmont is the worldâs largest gold mining company, headquartered in Colorado. It operates mines in North and South America as well as Africa.
    • Barrick Gold Corp. . This gold mining giant is headquartered in Toronto and operates in 13 countries around the world.
    • Franco-Nevada Corp. . Franco-Nevada doesnât own any gold mines. Instead, it buys the rights to royalties from other gold miners.

    Keep in mind, though, that the of gold companies are correlated with gold prices but also are based on fundamentals related to each companyâs current profitability and expenses. This means investing in individual gold companies carries similar risks as investing in any other stock. Single stocks may experience a certain level of volatility and do not provide you with the security of diversified funds.

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    Vaneck Vectors Gold Miners Etf

    The VanEck Vectors Gold Miners ETF holds the stocks of large gold mining companies. Its one of the largest gold ETFs, with about $15.6 billion in assets as of early 2022.

    As of early 2022, the VanEck Vectors Gold Miners ETF held shares in 56 gold mining companies. Its top five holdings by value are:

    • Newcrest Mining

    The five stocks make up more than 51% of the ETFs assets, with Newmont Goldcorp accounting for more than 16%. The gold stocks have ranging from Newmont Goldcorps $49 billion to Agnico Eagle Mines $13 billion.

    With the exception of Wheaton Precious Metals and Franco-Nevada, these top holdings are the world’s largest gold mining companies. Agnico vaulted up the list in 2022 by completing its merger with fellow gold miner Kirkland Lake Gold. Franco-Nevada and Wheaton Precious Metals are the leading gold streaming and royalty companies.

    The gold ETF enables investors to easily own a diverse, high-quality group of large-scale gold companies. The ETF also has a reasonable expense ratio of 0.51%, making it a relatively cost-effective way to invest in many gold stocks.

    Why Invest In Gold

    So whats the deal with the shiny metal anyway? There are so many exciting investment opportunities by now, why would people still go back to something as archaic as gold? Well, one of the main reasons why gold is still a popular asset is because of diversification. By having a range of investments that cover different areas, youre less likely to lose all of your money if one sector happens to take a nosedive. Gold is one of those sectors that it can be useful to keep money in.

    Piggybacking off of that, gold has historically performed well during times of market turmoil, since its a commodity that tends to maintain its value even when as other commodities like paper currency decrease. Its why investors tend to choose gold when currencies start to decline, as well, which in turn causes the price of gold to rise, which in turn attracts even more investors.

    Its also seen as a good investment to have during times of geopolitical instability . Gold is also seen as a good hedge against inflation, since its price tends to rise alongside rising costs of living.

    Another argument made by gold lovers? As emerging markets across the world are producing more investors, the demand for gold will supposedly continue to grow, while the fact that it takes a while for gold supplies to be replenished and its a finite resource means that demand willagain, supposedlycontinue to outpace supply.

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    How Do I Invest In Gold Mining Companies

    You can choose to buy shares in those companies involved in the mining and exploration of gold or invest in financial instruments that base their performance on the future value and changes in gold prices. These include products such as options, futures and spread betting. You can also invest in investment funds that themselves invest in gold to benefit from its value. You do not own any gold in these examples.

    How Much Should You Invest In Gold & Silver

    When and How to Invest In Oil, Gold and Silver Stocks

    None of the downsides listed above are intended to discourage you from investing in gold and silver. But you do need to be fully aware of the risks if you do.

    So how much should you invest in gold and/or silver? Most experts recommend you hold somewhere between 5% and 10% of your investment portfolio in gold and silver.

    That would include either or both bullion or gold-mining stocks and/or mutual funds. Given the upside potential of the metals in a crisis, a 10% position can provide adequate insurance for the rest of your portfolio, should your financial assets fall in value.

    The limited investment position will also serve to minimize any potential loss if the metals markets run against you.

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    Is Investing In Silver Stocks Right For You

    The price of silver can be volatile. Silver prices soared more than 45% in 2020, gave back some of those gains in 2021, falling about 10% in 2021, then staged a double-digit rally in early 2022. Silver prices ebbed and flowed as economic, inflationary, and geopolitical fears rose and subsided. Those catalysts affected the price of precious metals and cryptocurrencies.

    However, silvers inflation-protection investment properties are only part of the story. As mentioned earlier, silver is an important industrial metal. In particular, its essential for clean energy. The fast-growing solar energy and electric vehicle industries are two notable industrial demand drivers.

    Because of that, demand for silver should grow in the coming years, which could continue pushing its price higher. That makes silver a potential way to play the growth in clean energy.

    Most investors choose to own silver stocks over the physical metal such as coins and bars. When the demand for silver is rising, silver companies can often pursue growth opportunities enabling them to expand their profits faster than silver prices rise. That should allow them to outperform the precious metal. Not owning the physical metal also enables investors to avoid the hassles and risks of acquiring, storing, and insuring a physical asset.

    Gold Stocks With The Most Momentum

    Momentum investing is a factor-based investing strategy that involves investing in a stock whose price has risen faster than the market as a whole. Momentum investors believe that stocks that have outperformed the market will often continue to do so because the factors that caused them to outperform will not suddenly disappear. In addition, other investors, seeking to benefit from the stocks outperformance, will often purchase the stock, further bidding its price higher and pushing the stock higher still.

    These are the stocks that had the highest total return over the past 12 months.

    Gold Stocks with the Most Momentum

    Source: YCharts

    The comments, opinions, and analyses expressed herein are for informational purposes only and should not be considered individual investment advice or recommendations to invest in any security or adopt any investment strategy. Though we believe the information provided herein is reliable, we do not warrant its accuracy or completeness. The views and strategies described in our content may not be suitable for all investors. Because market and economic conditions are subject to rapid change, all comments, opinions, and analyses contained within our content are rendered as of the date of the posting and may change without notice. The material is not intended as a complete analysis of every material fact regarding any country, region, market, industry, investment, or strategy.

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    Drawbacks Of Gold Securities

    • Volatility. Just as with any company, a miner’s operating costs, reserves, and management all play a factor in its performance. As a result, shares prices tend to be more volatile: If bullion sinks 10%, gold stocks often plummet 15%. Miners definitely “have a higher speculative aspect to them,” says investment strategist Lyn Alden, who follows precious metals and currencies.
    • Systematic risks. A gold mining company’s share performance also reflects in political and economic conditions in its native country. Some of the biggest operations are in Africa, Russia, and Latin America â places that have known their share of turbulence and are often avoided by socially responsible and institutional investors.
    • You don’t own gold. Gold securities are less of a pure play. They represent physical gold but you don’t have the right to redeem them for the actual metal. So they don’t provide the protection against a paper currency or financial market meltdown that the metal itself does.

    How To Trade In Silver

    How to invest in gold, silver amid record inflation

    If you want to trade silver, here are the contract specifications on the MCX…

    Trading unit / contract size – Regular – 30 Kgs / Mini lot – 5 Kgs – 99.99 % purity

    Quoted size – Rupees / kilo

    Maximum order entry size – 600 Kgs

    Tick size – 1 Rupee

    Daily price band – 4% +2% +3%

    Initial span margin – minimum 5%

    Maximum open interest permitted – 100 MT or 5% of the overall exposure whichever is higher

    Contract tenure – 2 months

    Number of series available – 4 series available for trade

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    Buy Gold And Commodity Funds

    Retail, pooled or collective investments aggregate sums of money from lots of different people into one large fund managed on their behalf by a professional investment firm.

    Funds are either actively managed where a manager chooses holdings to perform to a specific investment mandate or take a passive approach with portfolios designed to copy a particular stock market or commodity index.

    Specialist commodities, mining and exchange-traded funds can provide you with exposure to gold, without the difficulties of trading and storing gold in its physical form:

    • Funds investing in gold mining companies: these include BlackRock Gold and General, Ninety One Global Gold and LF Ruffer Gold although they invest principally in mining companies, rather than gold itself. These funds have delivered 3-year returns of 62%, 76% and 109% respectively , according to data from Trustnet. These funds charge a higher fee as they are actively-managed by a fund manager.
    • ETFs: if you want an investment that tracks the price of gold rather than the value of mining companies, there are a number of ETFs to choose from. For example, the iShares S& P/TSX Global Gold Index and the ProShares Ultra Gold ETF have achieved 3-year returns of 88% and 79% respectively . ETFs tend to have lower fees compared with active funds.

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