Gold: Buy On The Dip or Regret it Later

Gold was the beneficiary of a strong rally after the announcement of the open-ended QE3 that pledged to pump $40 billion/month into the economy. But after picking up some steam, the precious metal suffered a rough couple of weeks. October has historically been the worst month for gold over the last 15 years, and this year’s loss of nearly 3.5% for the four week period fell right in line with those expectations [for more gold news and analysis subscribe to our free newsletter].

Now that gold is seemingly correcting, many investors are wondering if the hard asset is at a bargaining point. Peter Schiff seems to think so. The renown investor recently said that “one day we’re going to look back at $1,700 with nostalgia. People are going to be shocked at how inexpensive gold was when it could be snapped up for such a bargain price.” Schiff has been urging investors to buy this commodity for quite some time, as he feels that the next few years could watch it soar to over $5,000 per ounce.

iShares Dow Jones US Home Const. (ETF) (NYSEARCA:ITB)

With analysts calling for a recession next year, inflationary fears and constant dollar debasement, this commodity certainly has a lot going for it. So for those of you who fall under the umbrella of general gold bullishness, the only question you need to answer is when you think a buying opportunity presents itself. Looking back at historical trends, gold has been very strong between November and February, but the precious metal has stumbled out of the gate this month thanks to a stellar jobs report [see alsoInvesting In Gold: The Definitive Guide].

Below, we outline three ways to make a play on gold as the commodity continues to correct.

iShares Gold Trust (NYSEARCA:IAU): The cheapest physical gold ETF, IAU charges 25 basis points for investment and has more than $11.5 billion in total assets. While it is cheaper than the competing GLD, investors should note that IAU represents 1/100th an ounce of gold and SPDR Gold Trust (NYSEARCA:GLD) 1/10th. Assuming penny-wide spreads, that means that investors will be paying more for IAU if they want the same amount of gold exposure as far as ounces of ownership are concerned.

E-TRACS UBS Bloomberg CMCI Gold ETN (UBG): This ETN offers exposure to a basket of gold futures, though it only has $8.7 million in assets. What many investors forget is that physical gold ETPs are taxed as collectibles no matter how long you hold them, so buying GLD or IAU will yield you a handsome 28% capital gains rate even if you held them for multiple years. UBG, on the other hand, will charge just 15% in long-term cap gains taxes, a 13% delta that could make a huge difference on your bottom line returns [see also The Dangerous Sign Jim Rogers Sees For Gold].

Market Vectors Junior Gold Miners (NYSEARCA:GDXJ): One of the most popular mining products out there, GDXJ affords exposure to small-cap gold miners. Though some may prefer its large-cap counterpart Market Vectors Gold Miners (NYSEARCA:GDX), it should be noted that small-cap companies tend to be more of a pure play as some of the larger firms that fall on GDX’s radar also mine silver and other metals.

This article was originally written by Jared Cummans, and posted on CommodityHQ.

blog comments powered by Disqus
Insider Monkey Headlines
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months Click to see monthly returns in table format!

Lists

The 14 Most Watched TV Finales Ever

The 10 Best Selling Role Playing Games of All Time for PC

10 Most Influential Papers In Economics

Top 8 Biggest Charities in the US

10 Worst Celebrity Career Moves Ever

Top 10 Best Paid Tennis Stars in the World

10 Cities with High Demand for Nurses

6 of the Worst Greeting Card Messages Ever Crafted

6 Ways to Make Money in ArcheAge and Build Your Empire

10 Foods To Eat To Lower Cholesterol Levels

The 10 Most Hated Television Characters of All Time

The 30 Worst Halloween Costume Ideas Ever Brought to Horrible Life

10 Vocational Skills in Demand Today with Jobs Waiting to be Filled

10 Best Places to Visit in Central and South America

The 10 Greatest Empires in History Which Nearly Conquered the World

The 6 Cheapest Boarding Schools In America 2015

5 Clear Reasons LoL is Better than DotA, Continues to Rule MOBAs

The Only 9 Teams with a Chance to Win the Super Bowl

The 15 Most Common Phobias in America that Induce Fits of Panic

Top 6 Least Expensive Tourist Destinations in 2014

Jim Goetz, Peter Fenton, Jim Breyer: Top 6 Venture Investors for 2014

Top 15 Billionaires in 2014

5 Pitfalls To Avoid When Buying a Franchise

Top 20 Medical Schools in the US – 2014 Rankings

4 Business Strategies that Turned Jamie Oliver into the World’s Richest Chef

6 Qualities That Make You A Good Team Player

10 High Paying Seasonal Jobs in America this Holiday Season

The 10 Busiest Shipping Lanes in the World

5 Most Valuable Brands in China

The 10 States with Highest Substance Abuse Rates Crippling Their Populace

The Top 10 Things to Do Before You Die That Will Echo for Eternity

The 10 Best Selling Items on Etsy

Top 10 Things to Do in Tokyo, the Greatest City in the World

10 Mistakes on Social Media that Can Harm You and Will Probably Get You Canned

The 10 Best Cities to Find Jobs in 2014

The 10 Most Controversial Songs Of All Time to Hit (and get Banned from) the Airwaves

The 20 Biggest IPOs in US History

The 10 Best Places to Visit in Mexico that Are Beautiful and Safe

7 Bad Habits that Age You Beyond Your Years

The 40 Best Fortune Cookie Sayings That Will Leave You Bemused, Befuddled, or Beguiled

10 Foods to Eat Before a Workout to Make Every Drop of Sweat Count

The 5 Best Documentaries On Netflix You Must See

The Most Heartwarming and Inspirational Story Of This Halloween Season, It Will Make You Cry and Jump For Joy

10 Best Party Songs of All Time to Bring the House Down With

5 New World Order Conspiracy Theories that Will Strangle the World

The 10 Highest Rated Movies of 2014

The 10 Largest Container Shipping Companies in the World

The 10 Largest Armies in the World: Who Should We Be Afraid Of?

Best Warren Buffett Quotes on Money You Need to Hear

The 10 Highest Suicide Rates by Profession

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!