Second is the trend that the U.S. is going to infinitely expand the U.S. money supply. The Fed’s $85 billion monthly bond purchases has done well to keep lending rates and inflation under control, but a constantly expansive money supply is going to eventually push the inflation rate higher and provide yet another reason for investors to buy into gold, the ultimate inflation hedge.
Where to invest?
Now that you understand why I’m so excited about gold, let me share with you a few of the ways you can buy the yellow metal with varying levels of risk.
The first method is by purchasing an ETF that closely tracks the underlying price of gold. The iShares Gold Trust(ETF) (NYSEMKT:IAU) and SPDR Gold Trust (ETF) (NYSEMKT:GLD) are two easy ways of buying into an ETF that holds physical gold without having to go through a physical gold dealer and taking delivery of the product. Also, both ETFs are extremely liquid, which means that you can access your money through your favorite brokerage by buying or selling anytime you need. The downside, of course, is that physical gold offers no dividend yield, so it’s all about the price appreciation potential here.
If you’re willing to take on a bit more risk in exchange for a dividend, I’d suggest a basket ETF like the Market Vectors Gold Miners ETF (NYSEARCA:GDX) which has 31 different holdings in its portfolio and a net expense ratio of just 0.52% while yielding 1.2%. You’ll get good exposure to plenty of North American gold miners as well as plenty of global gold mining leaders.
If you’re willing to roll the dice even further, my suggestion would be to look at the two most cost-efficient gold miners: Yamana Gold Inc. (USA) (NYSE:AUY) and Goldcorp Inc. (USA) (NYSE:GG). Both Yamana Gold Inc. (USA) (NYSE:AUY) and Goldcorp stood atop my top-performing gold miners leaderboard in the first-quarter thanks to extremely low mining costs associated with byproduct metal sales. Yamana has been particularly strong, turning in remarkable production growth, while Goldcorp offers investors one of the lowest debt-to-equity ratios in the sector thanks to its strong operating cash flow. To add, Yamana Gold Inc. (USA) (NYSE:AUY) and Goldcorp both offer yields of 2% and are valued at just 10 and nine times forward earnings estimates.
The article 5 Reasons Why Gold Is a Screaming Buy Right Now originally appeared on Fool.com.
Motley Fool contributor Sean Williams has no material interest in any companies mentioned in this article. You can follow him on CAPS under the screen name TMFUltraLong, track every pick he makes under the screen name TrackUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong.The Motley Fool recommends Goldman Sachs Group, Inc. (NYSE:GS).
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