In the volatile world of 2024, geopolitical events and economic phenomena have started playing a high-stakes game where the collective fate of our global economy hangs in the balance. Perturbing predictions paint a perilous picture—one that could witness complete collapse or, if steered carefully, miraculous survival. Let’s uncover the mysteries shrouding our economic destiny.
“Gold is money. Everything else is credit.” – J.P. Morgan
The monster of inflation, once seen only in history books, has returned in full force to haunt the economies of major superpowers. U.S inflation shot up by 0.9% just in June 2024 alone, while the UK is grappling with its highest inflation rate since 2008, standing at 3.5%. This level of crippling inflation, if uncontrolled, could very well lead to widespread financial instability.
Beyond the economic borders, geopolitical upheavals are causing tremors that can be felt across financial markets worldwide. Foremost among these is the ongoing war between Israel and Palestinians. Already, its repercussions have been brutal on global oil and energy markets, with the tensions stoking concerns about supply disruptions.
“Geopolitical tensions not only disrupt energy markets, but invariably create uncertainty that harms global stock markets as well, impacting sectors far beyond energy. Tech stocks and the like could potentially see a free fall”- Senior Market Analyst
A Glimpse into the Future: Gold at $3000?
In such a grim scenario, where tech and energy stocks could plummet, there’s surprising optimism for a different asset – gold. Some economic forecasts indicate that, if these conditions persist, gold could soar to $3,000 per ounce. As fear takes hold, gold starts to shine, attracting investors who are seeking refuge and stability amidst the turmoil.
The Golden Shield: Gold as an Economic Safe Haven
Amidst the economic fluctuations and geopolitical tremors, the resiliency of gold sparkles radiantly. Gold, known by some as ‘the Fear Index’, often sees a surge in value during periods of catastrophic upheaval and instability. It’s not just a shiny precious metal; it’s one of the few assets that can hold our economy together when the unthinkable happens.
While the tech sector may be vulnerable to inflation, gold has historically shown resilience in the face of such economic tribulations. In fact, during the inflationary period of the late 1970s, gold prices surged dramatically. With the anticipated surge to $3,000 per ounce, gold can be the collapsed parachute that softens the fall of a plummeting economy.
Why is this? Gold has inherent value that’s recognized worldwide, making it a commodity everyone wants when paper currencies lose their appeal. It’s a universal language of wealth and security. And in times of economic distress, when other assets turn to ashes, gold often emerges unscathed, providing the much-needed stability to shield investor wealth.
What makes gold this super metal is its scarcity. Unlike currencies or stocks, gold cannot be created out of thin air. It must be mined, and with much difficulty. It’s this rarity, combined with its unique physical properties and cultural significance, that sustain its worth even in times when economies tremble.
Investing in gold, therefore, is not about if, but how. There are several ways to invest in gold, each of which has its own merits and risks. But one route shines brighter than the rest: gold royalty stocks.
Various Ways to Invest in Gold
Investing in gold can be a lucrative venture with options ranging from physical gold to gold mining stocks, gold ETFs, private investments in gold companies, and gold royalty stocks. Selecting the right path depends on your financial aspirations, risk appetite, and investment horizon.
Digging Deeper: Investing in Gold Mining Stocks
Gold mining stocks offer a share in the dazzling potential of gold. These stocks mirror gold prices, experiencing positive effects when gold prices surge. However, they are susceptible to operational difficulties like escalating production costs and geopolitical uncertainties.
Touching the Intangible: Gold ETFs
Gold Exchange Traded Funds (ETFs) are a hassle-free way of partaking in gold’s price movements. These funds keep track of gold prices and can be traded like regular shares on the exchange. It’s crucial to note that while ETFs expose you to gold’s price fluctuations, they don’t provide a direct ownership of gold.
Off The Beaten Track: Private Investments in Gold Companies
Private investments in gold companies can yield high returns, helping adventurous investors who are willing to accept elevated risks. These investments are typically made in budding, exploration-focused companies and can generate massive returns if these companies strike gold or get acquired. Note that they are potentially riskier and less liquid than public stocks.
The Gleaming Crown: Gold Royalty Stocks
Gold royalty stocks are a class apart. These companies finance mining operations in return for a ‘royalty’ – a share of the gold produced or revenue from the mine. Without the associated risks and with exposure to gold’s price and mining operations, they offer the best of both worlds. We’ll explore this more in our next segment.
Why Gold Royalty Stocks Outshine the Rest
Why turn to gold royalty stocks amidst plenty of gold investment options? The answer lies in their unique business model. Unlike mining companies, gold royalty companies do not operate mines. Instead, they finance them in return for a percentage of gold produced or net proceeds from it. This arm’s length approach insulates them from on-ground risks such as operational mishaps, ballooning costs, and political instability.
“Gold royalty stocks can provide a margin of safety during uncertain times due to their diversified portfolio and lower operational risks.” – James Rickards, American lawyer, economist, and investment banker.
The benefits of investing in gold royalty stocks are manifold:
- Lower risks: Since they do not own or operate mines, risks associated with mining operations are considerably reduced.
- Greater diversity: Royalty companies typically have a vast portfolio spread across multiple countries, providing geographical and political diversification.
- Higher Margins: They maintain lean operations allowing them to reap more significant benefits from high gold prices.
- Continuous Cash Flow: They receive a steady stream of income in the form of royalties regardless of whether the gold price rises or falls.
These compelling factors make gold royalty stocks the preferred route for many smart investors. However, not all gold royalty companies are created equal. Let’s draw our attention to one shining star in this space – Sandstorm Gold Royalties.
Sandstorm Gold Royalties (NYSE: SAND)
As we explore the expansive world of gold investments, one name that frequently pops up on any savvy investor’s radar is Sandstorm Gold Royalties (SAND). Why? The answer is both simple and gratifying – Sandstorm is not your conventional gold company. Instead of digging mines and sifting soil, this enterprise has chosen a more calculated, less risky pathway – it purchases royalty interests in gold mined by other companies. Thus, while gold prices continue to ascend amidst global uncertainties, Sandstorm takes its share from the top, without buckling under the confinement of operational costs that conventional miners face.
The company’s stock is currently priced at a modest $4.86. What this means for you, should you decide to ride the Sandstorm wave, is that while gold prices continue to increase, Sandstorm is positioned to take a bigger slice of the pie, without the associated risks and costs.
“I find the royalty model to be the most compelling. With royalties, you can participate in the upside without taking on the risk inherent in mining, so there is less downside if things go wrong…”– Amir Adnani, CEO of GoldMining Inc.
In an industry punctuated by risks and volatility, choosing a gold royalty company over traditional mining outfits could be a game-changing move. The superior potential benefits of this strategy have been verbalized by Daniel Earle, President & CEO of TD Securities, “Companies that generate royalty revenue are better positioned to weather downturns than traditional miners because they have lower costs and can quickly scale up when conditions improve…”
In essence, Sandstorm has created a model that seems virtually impervious to the typical forces that may drive investors away from traditional gold mining stocks. Its diversified portfolio has stake in over 190 assets, distributed globally, allowing it to enjoy a broad-spectrum influence on gold production, at a fraction of the risk. This makes SAND a golden goose egg for investors looking for resilience and stability amid economic fluctuations.
Investing is not black or white; it’s more of a spectrum of greys. Understanding these nuances allows us to make informed decisions. In the current global scenario, market volatility, geopolitical conflicts, and inflation make traditional stocks and bonds look less appealing. The situation calls for a tactical shift—this is where gold and, in particular, gold royalty stocks, play a crucial role.
As I see it, gold can potentially offer the robust hedge investors need amidst an uncertain economic environment. It’s not just about the precious metal itself, but the myriad ways in which you can invest in it—from mining stocks and ETFs to private investments. They each have their distinct advantages. However, my research and analysis lead me to confidently state that gold royalty stocks stand tall among these avenues of gold investment.
When examined under the lens of risk and return, gold royalty stocks exhibit favourable characteristics. They have proven their resilience in the face of economic downturns, offering attractive investment returns while reducing direct operational risk associated with gold mining.
There is a myriad of options within the gold royalty domain as well, but Sandstorm Gold Royalties (NYSE: SAND) stands out. This company’s business model reduces the usual risks associated with gold mining. It gives investors a chance to profit from gold’s potential rise without worrying about operational issues that can plague mining businesses.
The current price of $4.86 makes SAND an attractive buying opportunity. The company’s strong portfolio, coupled with promising exploration potential, could drive significant growth, even in volatile markets. Moreover, it offers the added benefit of a monthly dividend—rare for gold stocks and a significant asset to any investment portfolio.
I firmly believe in understanding the market dynamics, assessing the risks, and then making an educated decision. From this standpoint, investing in gold—in particular, using a diversified and risk-managed approach such as gold royalty stocks—meets the criteria of a wise investment move.
While ‘gold at $3000’ may seem like a distant possibility today, given the fast-paced and uncertain world we live in, it is not an entirely elusive goal. We must prepare our portfolios for such scenarios, and having an exposure to gold and, more specifically, to companies like Sandstorm Gold Royalties, is a prudent investment strategy.
Disclaimer: It’s essential to do your due diligence, and remember that this article’s contents represent my understanding of the market and my personal investment beliefs.