5 Leading Experts Make the Case for Gold

Commodities -- including gold -- have taken a hit in a wake of the collapse in oil prices. Despite the short-term pullback in gold and silver, several of the most respected investment advisors, and contributors to MoneyShow.com, continue to make the case for safe haven buying of precious metals. Mary Anne Aden and Pamela Aden, The Aden Forecast Gold is a special situation today. We want you all to be on board. This is likely going to continue because gold has always been, and still is the world's favorite safe haven. Even though it may seem like it at times, it's not the end of the world. Yes, the economy is going to suffer, but we don't yet know how bad it's going to be. For now, the world's big central banks and governments are doing all they can to keep the financial system working and intact. Emergency financing is needed all over the world. The Fed, for instance, is printing money like mad. This will end up fueling big inflation down the road, but it seems that all agree we'll cross that bridge when we come to it. The bottom line, this is a major event that's going to change many things. So keep your gold and be prepared for whatever comes our way. With gold above the technical $1,536 level, it's on its way to the 2011 highs above $1,900! And indeed if gold stays above $1,700, this target could be reached sooner than we think! Gold will surely be volatile as the pandemic evolves, but look at this as time to get set for the major rise should weakness occur. Gold is the strongest precious metal, and it's positioned to rise in a several year advance. This year will likely continue to see volatile moves with the ebbs and flows of the virus, and don't be discouraged by this. Silver is cheap and it's a great buy now. We recently bought more gold and silver including SPDR Gold Trust and iShares Silver Trust . Keep your gold mining shares position as well. We continue to hold positions in Royal Gold , Agnico Eagle Mines , Pan American Silver and Eldorado Gold . Jim Woods, Successful Investing In conjunction with a buy signal in our Gold Plan timing model we added an allocation to the iShares MSCI Global Gold Miners ETF in both our Income and Growth portfolios. In our growth portfolio, we also added an allocation to SPDR Gold Shares . GLD is an ETF pegged to the price of gold bullion. This fund doesn't offer the upside potential of gold mining stocks, but it is the easiest way to gain exposure to physical gold, as the fund is pegged at the price of gold bullion. Until we get our next equity Buy signal, RING and GLD are great ways to have some exposure to a sector that is doing well from the dual tailwinds of low interest rates and a weakening U.S. dollar. The Fed is at the heart of this tailwind, as interest rates are likely to remain low and the stimulus in the economy remains an inflationary driver (gold thrives in an inflationary environment). As we did in the Income and Growth portfolios, we added exposure to our Aggressive Portfolio based on the Gold Plan Buy signal. Yet instead of adding a single-beta gold mining fund such as RING to the mix, we opted for the leveraged gold fund -- the Direxion Daily Gold Miners Index Bull 2X Shares . Note that this fund used to be a 3X levered fund, but on April 1, the fund's leverage was lowered to 2X due to liquidity issues that occurred during March's violent market volatility. Yet despite the leverage change, NUGT remains the best way to aggressively play a Gold Plan Buy, and was thus chosen to be our recommendation. Jim Stack, InvesTech Research The Fed's balance sheet is expanding at a record pace, with Bank of America expecting holdings to reach $9 trillion by the end of 2020. In the midst of this monetary experiment of epic proportion, gold provides a safe haven in the form of purchasing power protection, as increasingly extreme monetary actions threaten the long-term value of the dollar. The cumulative actions taken by both monetary and fiscal authorities are greater in size, speed, and breadth than any time in U.S. history. This puts the U.S. dollar at risk of devaluation and increases the benefits of holding gold, as the two are typically inversely correlated. For example, gold prices increased by more than seven times in the late 1970s and early 2000s -- both of which were periods of dollar weakness. Since late 2018, however, the dollar and gold have rallied in tandem. While this seems like a paradox, there are good reasons why this has happened. First, there is a shortage of U.S. dollars in the global financial system, creating a supply-demand imbalance, which has provided support for the dollar in recent years. On the other hand, gold has begun to approach its all-time highs largely because of the accumulated stress in the global monetary system. Looking forward, it is more likely that there will be a resolution to the dollar shortage problem than to a fragile monetary system, which requires near-zero interest rates to survive. As a result, we anticipate further upside potential for gold stocks in the months ahead. There are many reasons to be skeptical about the prospects of a V-shaped recovery. That's why we want to be cautious about increasing allocation at this time, and to focus on selective opportunities. One holding in the InvesTech Model Fund Portfolio that we have incremented this year is the VanEck Vectors Gold Miners ETF , which we increased from 4% to 6% in March. The reason for this increase is simple. Gold has proven to be an effective historical hedge against excessive monetary and fiscal stimulus. We prefer investing in a gold miner ETF to adding a bullion fund, such as SPDR Gold Shares , because mining stocks are typically more leveraged to the price of gold. That's evident if we look at the performance of both funds following the Financial Crisis in 2009-10. In fact, mining stocks can easily double the rise in gold bullion during a gold market rally. The Van Eck fund is a good choice for the portfolio, as its holdings range from small to large mining companies with a focus on two of the largest producers in North America: Newmont and Barrick Gold . Depending on how the current financial situation unfolds, this is a position that we may consider incrementing further as warranted. Mike Cintolo, Cabot Top Ten Trader Despite the market rally, some signs of economic re-opening around the globe and a collapse in most commodities, gold and precious metals prices remain elevated and/or have bounced back sharply of late. That's helping all firms in the gold mining group, though our favorites are the high-margin operators that own gold streaming contracts or royalties without the capital expense involved in mining it. One of those is Franco-Nevada , whose main business is streaming, providing up-front payments to miners in exchange for the right to buy gold and other resources at a set, low price. Franco's extensive portfolio includes some 300 royalties in gold, silver and platinum (two-thirds of its overall assets) and oil/gas projects (one-third). With financing likely to become harder to come by during the economic downturn, miners will increasingly turn to companies like Franco to provide money to sustain their operations; in exchange for providing assistance, Franco can leverage downturns to grow its portfolio at advantageous prices (as happened in the 2015 commodity slump). Still, the main reason or the strength today is that business is good and, despite the hit in energy, should get better in the quarters ahead. In fact, business is already picking up -- sales and earnings have ratcheted higher during the past couple of quarters, and while energy will crimp growth a bit this year, analysts still see the bottom line up 20% in 2020 as the firm benefits from higher metals prices, all while maintaining gigantic profit margins (47.8% pre-tax margins last year!). A token dividend (0.8% yield) puts a nice bow on the package. Franco-Nevada looked like the leading gold stocks even before the virus hit, though it knocked us out when the stock plunged with the market in March. But shares found big-volume support at the lows, snapped back quickly, and last week, staged a good-volume move to new highs. It's now up five weeks in a row, which is a rarity. The stock looks like one of the top two or three leaders in the group, so if you want a stake in precious metals, we're fine snagging shares here or on weakness.

5 Leading Experts Make the Case for Gold

Gold has always been, and still is the world's favorite safe haven.

Columnist Conversation

Tuesday Morning Fibocall for 10/19/2021

This Weekend on Real Money

Thursday Morning Fibocall for 10/14/2021

COLUMNIST TWEETS

Please Join or Log In to manage and receive alerts.