Gold: The Future of Money

Gold is hitting record highs against scores of fiat currencies.

There are three perfect ways to gain exposure to the gold market.

The fundamentals driving the rally are likely to continue into the foreseeable future.

We have begun witnessing something strange and phenomenal in 2019.

For the first time in many years, gold bugs are being vindicated. People who have for a long time been called “doomsayers” are now seeing their predictions come true to a certain degree.

After a six-year bear market, the precious metals market has begun to rally hard. 

What’s the best way to play this rally? Surely you don’t want to put all of your money into physical gold and bury it in the backyard (although this may be beneficial in the event of a zombie apocalypse).

That said, holding some physical gold in your possession is wise, as there’s zero counterparty risk involved. But that's not the only option. 

Here are three of my favorite ways to get into gold.

Goldmoney

Goldmoney allows you to hold gold, silver, platinum, and palladium in secure vaults. The vaults are managed by well-established security companies such as Brinks and Loomis in various nations around the world including Canada, Switzerland, Singapore, Hong Kong, and more.

Users can purchase precious metals via a variety of payment methods including PayPal and ACH transfer.

In my view, the two biggest benefits of Goldmoney are:

• Your metals are easier to liquidate
• You don’t have to hold them yourself

Goldmoney makes it easy to sell metals for the fiat currency of your choice.

If you hold physical gold, the only way to liquidate it is either to sell it online through a marketplace like eBay or go to a brick and mortar coin shop or other bullion dealers.

And while storing gold in a vault involves some measure of counterparty risk and requires a small monthly fee, it’s worth it when you consider the potential pitfalls of holding too much gold in your personal possession.

Natural disasters or theft are risks of holding gold on your own. A flood, hurricane, or wildfire could cause you to lose your metals. And thieves could target them.

Holding gold in a vault is, of course, the most secure method.

What about investors who don’t care about the metal itself and instead want a way to gain exposure through their brokerage accounts? 

Gold ETFs

An easy way to gain exposure to the gold market is to invest in a gold exchange-traded fund. There are too many gold ETFs to count. Two that have seen extraordinary gains so far in 2019 at GDX and GLD.

The VenEck Vectors Gold Miners ETF (GDX) is up nearly 40% YTD. This fund holds shares of mining companies in over ten different countries on four continents. In order to be added to the index, at least 50% of a companies revenue must be derived from gold-mining related activities. 

SPDR Gold Shares (GLD) has seen YTD returns of 17%. GLD only buys physical gold bullion. Due to the ownership of bullion, this fund moves with the price of gold closely.  

“The Big Short” Investor Michael Burry, who made a fortune shorting the housing crisis in 2008, has recently said that passive-investment vehicles like ETFs and index funds remind him of collateralized debt obligations (CDOs) that helped spark the Great Recession. ETFs are forming a bubble similar to the kind that brought down the global financial system over a decade ago, according to Burry.

Fortunately, a gold ETF is different since it represents a safe-haven asset that investors flock to during times of instability. If Burry is right and there is an ETF bubble about to burst, that would be bullish for gold, gold ETFs, and gold mining stocks.

Junior Gold Mining Stocks

For traders looking for leveraged gains, junior mining stocks provide a promising opportunity. Most of these are small-cap penny stocks with huge growth potential.

As the price of gold rises, so too does the profitability of mining it. Companies that calculated a profitable business model at prices of $1,275 per ounce may see huge gains with a price of $1,500 or more.

There are tons of promising small-cap companies in this sector.

Companies like Pure Gold Inc (LRTNF), Westhaven Ventures (WTHVF), and K92 Mining (KNTNF) all have promising fundamentals. Pure Gold and Westhaven have recently hit bonanza grade gold intercepts, meaning they have found very rich deposits of gold ore.

The Gold Bull Market Has Only Just Begun

The fundamentals driving the huge rally in gold grow stronger by the day. Global instability, negative interest rates, trade wars, and volatility in equities all contribute to the demand for safe-haven assets like gold. And that’s not to mention an even simpler reason for the gold rally – declining values of fiat currency.

Gold has already hit all-time highs against 72 different fiat currencies this year. It’s only lagging against the US dollar, and even there we see 6-year highs.

Global central banks have been printing money and debasing their currencies for a decade. All that easy monetary policy means good things for gold. And now the Fed has begun to reverse course with reducing its balance sheet and raising rates. The precious metals party is just getting started.