How to Profitably Invest in Gold Mining Stocks with This Winner
Gold is back on everyone's list as a must-have investment this year, and one of the best ways to profit from rising gold prices is to invest in gold mining stocks.
Gold prices are up 6.3% since hitting a five-month low on Dec. 12. And this gold price rally is only just beginning.
Money Morning Resource Specialist Peter Krauth predicts we are entering a gold bull market that could last until 2020, at least.
While investors can always invest in gold by owning physical gold or gold-backed exchange-traded funds (ETFs), buying the right gold mining stocks can be an even more lucrative way to profit from the rising price of gold.
Gold miners become more profitable when gold prices rise, and well-managed companies with fertile mines can see their share prices rise much faster than gold.
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Since gold prices began to rally on Dec. 12, the price of gold is up 6.6%. But the Van Eck Gold Miners ETF (NYSE Arca: GDX) is up 11.3% in the same time. And since GDX tracks the entire gold miners index, it's weighed down by poorly run or unprofitable companies.
That's why we're going to show you one of the best gold mining stocks to buy in 2018.
But first, here's why the gold price rally is just getting started…
Why the Price of Gold Will Soar in 2018
Since gold hit its recent low of $1,045.40 in 2015, the precious metal has been on a bullish trend, with a 19.1% uptick in value.
In fact, right now could be just the beginning of gold's price rally.
Krauth sees the current bull market as something similar to the 1970's, where gold prices soared 700% before peaking in 1980. If the current gold bull market is anything like the one in the 1970s, then investing in gold in 2018 could be a very profitable decision for investors.
Investing in gold can be so profitable, because gold is more than just a shiny object that we pull from the ground.
The precious metal is used to both store wealth and is a component in manufacturing everything from jewelry to electronics. Those factors help push up demand for gold, which boosts its price.
But it's gold's use as a store of wealth and a hedge against uncertainty that's going to help boost its price in 2018.
There are three reasons we're expecting demand for gold to surge.
First, the value of the U.S. dollar is falling.
The U.S. Dollar Index (DXY) is steadily declining. Between January 2017 and January 2018, the DXY is down nearly 10%.
As the dollar weakens, gold becomes more valuable.
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Second, investors are starting to flock toward gold.
Another bullish indicator for gold prices in 2018 is investor trends. And right now, investors are moving into long gold positions.
Check out the Gold Bugs Short Index (NYSE Arca: HUISH). This index tracks the short positions taken on gold investments. Right now, HUISH is down 11.25% since this time last year, which means investors are pulling out of short positions on gold stocks.
That's a sign people who are putting money in the game expect gold prices to keep rising.
Third, turmoil across the world is raising uncertainty.
The threat of war with North Korea, the collapse of Venezuela, or even the potential for a stock market correction this year are all catalysts for gold prices.
If any event threatens stability or causes investors to worry about the future, gold's value goes up. Because gold is seen as a hedge against destabilizing events, investors buy up gold positions when uncertainty rises.
And 2018 will be no different…
That's why Krauth believes that we will see gold prices reach $1,400 in the first half of the year, which is about 12% above the current price. However, by the end of 2018, he predicts that gold will hit as high as $1,500, which is 18% above our current level.
These coming gains in gold prices make now the perfect time to invest in the right gold mining stocks, which Krauth believes are undervalued relative to the price of gold…