The traditional investment thesis behind physical gold is that it is viewed as a hedge. To simply put, whoever is carrying gold at these uncertain times makes the rules. So, when the uncertainty crops up or the inflation goes higher, it is usually seen that the gold, also known as precious yellow metal also receives a boost in value. As right now, there is plenty of economic uncertainty surrounding the Covid-19, which partially explains why there is an increased demand for gold across numerous industries and is also the main reason behind the recent rise of the gold price.
This is one of the main reasons that Investors look for a place to park their money where it would not lose its value. While investing in physical gold is what many people do but with the current yield environment, it will result in losing real money if the long term inflation persists. Being an attractive option it will yield less money and is expected to remain low for the foreseeable future. The best option is investing in gold mines stocks or mining companies in Colorado.
Gold mines investment as a hedge against inflation:
Putting some gold into your portfolio, including buying stocks. Many investors prefer to take an indirect approach as a hedge against inflation and invest in stocks of gold mines companies having their mines in Colorado. In the same way, investing in a well-running company can be profitable in bad times, a poorly managed one could fail, even in good times.
Different prospect than buying physical gold:
Despite the connection of gold, by and large, investing in mining companies is entirely a different prospect than buying physical gold. In terms of investment both are way different but the connection between the two, that is gold and the gold mines is undeniable. Note that, the gains advocated by the mining stocks investors in mining companies is potentially much larger than owning a piece of physical bullior or bar.
Tip: Thoroughly check the background of the mining company you are planning to invest in, the key is to check for the regions they operate in. it is very important that they have their mines in multiple locations, operating insecure and politically stable regions.
Shareholders receive yearly dividends:
Investing in mining stocks gives a chance to get benefits of so many variables. However, a common motivating factor for investors in gold or mining stocks is the long term security and the stability it can provide in uncertain times. As well, gold stocks are great for earnings and cash flow and this also means that they potentially have less room to fall if the markets in general fall.
Moreover, investors or shareholders of gold mining companies also receive yearly dividends which is not the case in buying or investing in physical gold. And as mentioned above, a well-run and stable company having multiple mines can still be profitable even in difficult times. This means that an investment in a profitable mining company will be able to provide the investors with regular return even when the demand for gold is low and its price drops.
Here is a list of few points that investors can consider before taking this approach:
It is very easy to trade in gold mining stocks as compared to physical gold bullions or coins. These can be easily bought and if the need for cash arises, stocks can be sold immediately.
It takes a lot of time and money to establish a gold mining business, so it is a better option to always look for a company with a sound financial record.
When investing in mining stocks patience is the key as you can experience huge price swings. Great research and knowledge can help you with this.