Equity
It’s not that hard to map the senior market: Google “top gold producing companies”. Barrick, Newmont, Anglogold, Gold Fields,… Research each one, set some own filters (country risk, production profile, etc.). Or go for an EFT like GDX or GDXJ, tracking a basket of +40 producers.
Remember, it’s your hard earned (fiat) money, only invest in what you understand & aware of what risks are present.
If you have more time & interest, you can deep dive into more senior & junior producers and see what fits your (tolerance) style the best. What is their record (living up to previous guidance’s)? Where are their mines located? What is their cost structure & thus leverage to gold prices? Production profile now and in 5y? Capital requirements? Ethical issues in the past? etc.
Appetite for even more risk? Say hello to the developers and explorers. Where the public can easily find the senior producers through Google, it gets a lot more difficult to sniff out the better explorers. While a bull can and will raise all boats, I feel more comfortable with picking out the well run ones. This is not to be advised to non junior mining geeks. Risk is high and failure is certain. In return, the few winners can show tremendous profits.
As mentioned in my previous post, I adjusted my portfolio to focus more on (leading) gold producers & cash rich juniors.
Physical
Good luck finding coins & bars at a reasonable premium at this moment.
- Supply: Several refineries closed => No new coins coming available
- Demand: Peaking
My suggestion: Don’t go overpaying now, just wait out the supply crunch. Even if you believe gold will hit 1800 by that time, that’s still less of a premium as the opportunistic dealers are offering you now on their final pieces. Other dealers take a different approach and are already take orders (with a 4-6 week delay) at a reasonable premium.
Note: Never confuse holding paper gold with physical gold. If your intention is to hedge against monetary policies, holding physical gold in your own hands is the only correct answer.
Now you got some exposure, when do you take profit?
Physical
If intended as hedge against the monetary system, I hope you’ll never need to sell your position out of necessity. Way to early to even start thinking about when & how to ‘use your gold’.
Equity
I’m turning to Jesse Livermore (Reminiscences of a stock Operator, Chapter 14, page 142) : “When the leaders cease to advance, the bull market for those particular stocks is over. As the overall bull tide is still running strong , bull money is still to be made as the rest of the market has rising power behind it”
My take-away: Buy the leaders, when they cease to advance, rotate to the new leaders. When also they run out of steam, it’s time to review the market conditions & collect your chips.
With the current hot streak (14/04/20, gold at 1734, up 13% in 30 days), the first calls for a breather and ‘taking some profits’ are arising. I can’t help you with making that decision. I’d look at individual levels. For example BTO, it just broke LT resistance and next day they reached a new ATH, bullish in any TA book.
A lot will depend on your long term view on PM prices and if you are into trading around core positions. Others are more at ease to hold and add at specific time intervals or buying any weakness. Your choice.
Challenge your believes
People life in their created bubbles with their own routines &habits. Favorite news channels & websites, who they listen to, who they follow online, etc. This affects your view of ‘what current reality is out there’.
Confirmation bias, you tend to search and attach more weight to opinions that are in agreement with your current way of thinking. Twitter, where you can build your own news feed, is a dangerous place if you’re unaware of this. Build a diversified information stream. Whether it be precious metals, politics, sports, climate concerns, etc.
Keep your friends close, and your enemies even closer. While it doesn’t feel natural, I try to find, read and understand the opposing views. As ‘gold’ fits in the complex macro story, there are so many angles you can find coverage on.
Another tell is the absence of articles on the topic in MSM. While you can read all about it on kitco & bloomberg, does the avg Joe even know what is going on besides the trillions created, the orange speeches and the daily Covid data overload?
My approach: Keep in touch with friends that don’t bother too much with the stock market, what have they picked up on? What is the local (financial) paper reporting? Find voices that fit in their gold views in the broader macro trends (DM me for specific names).
Stay safe and protect your wealth,
Cheers, Pete
