Precious Metal Stocks Are Not An Investment They Are A Speculation / Commodities / Gold & Silver 2019
Preamble
Let's start by defining investment and speculation, and for thispurpose, I have used Investopedia:
An investment is an asset or item acquired with the goal ofgenerating income or appreciation.
Speculationrefers to the act of conducting a financial transaction that has substantialrisk of losing value but also holds the expectation of a significant gain orother major value.
Precious metals such as physical gold andphysical silver are an investment and can be acquired and held for long periodsof time.
Precious metals mining sector
The precious metals mining sector is not an investment for thesimple reason that mines are being depleted of their treasure on a daily basis.Mining companies must either explore for new veins to mine, merge with otherminers, or acquire new assets in order to keep their pipelines topped up.Otherwise production drops and investors flee. Indeed, we can all name a fewmines that have been around for some time, but they are in the minority.
Ask yourself the question, why it is that the precious metalsmining companies pay a dividend which varies from miserly to non-existent? MayI suggest that the reason is because the money they earn is ploughed back intothe business in order to secure continuity of production. When an investoracquires shares in a mining company, it is not for the dividends; it is forcapital appreciation.
On the other hand, mining companies as a speculation are extremelyrisky, but from time to time, they offer the possibility of stupendous returns to thespeculator. It is often said that there is no fever like gold fever, and thenext one will be more spectacular than anything we have experienced in thepast. I traded gold in the late '70’s and can vividly remember the euphoriathat surrounded the dramatic rise in the price of both gold and silver. Is itdifferent this time? You bet it is. The number of players back then waslimited, but this time around anyone with a laptop or even a mobile phone,anywhere in the world can join in the fun at the press of a button.
Precious metals are cyclical, and they have been unloved foryears, struggling along just to survive. In my very humble opinion, they havebottomed, and the bull market has commenced. Be warned though, it is not aone-way ticket to the moon; it is a gut-wrenching journey with many twists andturns and definitely not for the fainthearted.
Conclusion
If you are an investor by nature, then buy physical gold andsilver and store it in a safe place, not a bank.
Timing is everything as this bull will not last forever. Therewill be a blow-off in the final stages as all bull markets come to an endsooner or later. This bull has a life span of around three or four years andthen it's game over.
Conservative speculators should stick to the quality stocks astheir capital gains will be handsome and offer the investor a tad less risk.
Adventurous speculators will need to look further afield in orderto generate returns if you are targeting 10 and 20 baggers.
Hyperactive speculators may want to consider various optionsstrategies in order to achieve eye watering profits, but beware when it doesn'tgo according to plan, it can be very costly.
Go gently,
Take care.
BobKirtley
Email:bob@gold-prices.biz
www.gold-prices.biz
URL: www.skoptionstrading.com
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