SPDR Gold Trust (ETF) (GLD), Goldcorp Inc. (USA) (GG): Should You Be Buying Gold Before the Market Crashes?

Unless the Fed is able to achieve the elusive “soft landing” that would be required for an orderly unwinding of the Fed’s balance sheet and a manageable correction in the stock market, equities could come under violent pressure when rates start to rise again. When that occurs, gold is likely to regain favor and could run much higher. The precise timing is hard to fathom, but the stock market rally is overdone. Considering a prudent hedge is advisable for all investors, and an allocation to gold may be the best way to achieve it.

How to play gold
Owning shares of SPDR Gold Trust (ETF) (NYSEARCA:GLD) is a solid way to gain exposure to gold and avoid some of the stock-specific risks associated with owning stocks such as Goldcorp Inc. (USA) (NYSE:GG). Barrick Gold Corporation (USA) (NYSE:ABX) holds the appeal of being the largest gold miner on the planet, but it carries the same risks as Goldcorp. Despite the company’s promise to tighten its belt, it faces the same pressures — rising production costs and environmental concerns. If gold runs, silver is likely to follow suit. Thus, the iShares Silver Trust (ETF) (NYSEARCA:SLV) will probably move as well. The industrial nature of silver may make it more appealing in the near term while you wait for Fed policy to change. Likewise, Silver Wheaton Corp. (USA) (NYSE:SLW) is a great way to get exposure to precious metals. The silver streaming company buys the output of other miners at a set cost, meaning it, too, is insulated from production cost concerns. The company has thus been able to simultaneously achieve an operating margin above 70% and still boast the largest silver reserve on Earth, at more than 1 billion ounces.

Ultimately, taking a somewhat diversified approach with the allocation you want to direct to precious metals is the way to go. The pure commodity play, SPDR Gold Trust (ETF) (NYSEARCA:GLD) and iShares Silver Trust (ETF) (NYSEARCA:SLV), has the appeal of being insulated from the stock market, but finding the blend that works for your specific needs is best. In any case, considering the role of equities should be a part of building your precious-metals portfolio.

The article Should You Be Buying Gold Before the Market Crashes? originally appeared on Fool.com and is written by Doug Ehrman.

Fool contributor Doug Ehrman and The Motley Fool have no position in any of the stocks mentioned.

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