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Another Argument for Physical Gold

Another Argument for Physical Gold

Last week, Newmont Mining posted their latest quarterly results, and to say the news was "disappointing" would be quite an understatement. As such, the price of Newmont shares fell sharply, ultimately reaching new five-year lows.

I suppose the best way to start this post is with a link to Newmont's latest earnings report. Maybe you should take a minute to look it over?

While the report sounds just peachy on the surface, the market responded to the news with a resounding thud. On the day the earnings were released, Newmont shares fell $2.43 or 7.3% to $30.89. In the two trading days since, it has fallen further. As I type on February 26, Newmont stands at $30.05, the lowest price seen since May 10, 2019. You might also note that, in just under two years, the shares have fallen by over 60%.

Newmont Mining Corp. Weekly Candlestick Chart

Newmont Mining Corp Weekly Candlestick Chart

It gets worse. Not only are Newmont shares cheaper than they were five years ago, they are also cheaper than they were TWENTY years ago! Oh sure, there have been ups and downs, and active traders with perfect foresight have been able to generate some profits along the way. However, how can anyone rationalize a long-term investment in a company that trades sideways for two decades while the price of their principal product moves up fivefold?

Newmont Mining Corp Monthly Candlestick Chart

Newmont Mining Corp Monthly Candlestick Chart

Gold Monthly Candlestick Chart

Gold Monthly Candlestick Chart

Now this isn't to say there’s not decent fiat cash to be made in the mining sector. There is. My friend Eric Sprott has made hundreds of millions of dollars over the decades by searching out and discovering the right investments at the right time. But he's Eric Sprott and I'm not. And neither are you. 

You and I, as mere mortals, are left on our own trying to decipher good mining companies from bad. As such, it's quite easy to look at a company like Newmont—the largest gold miner in the world—and think they offer great leveraged exposure to the gold price. But, obviously, they don't. The chart doesn't lie!

So what's the point in bringing this to your attention? 

Sure, there are periods when it can be profitable to own and trade the mining shares. When gold and silver prices are experiencing robust up trends, the shares often wildly outperform the metals. For example, the first eight months of 2016 saw gold move up 25% while the HUI mining share index moved up 250%! It was great fun and we all thought we were brilliant! However, those brief rallies have always been followed by long, drawn out and extended pullbacks.

And sometimes those pullbacks get so deep that new lows are made, completely wiping out all the previous gains despite a gold (or silver) price that remains steady or slightly higher. Look again at those charts above. Twenty years of Newmont and twenty years of gold. What conclusion do you draw?

For me, I'm left questioning why I own mining shares for the long term. Yes, when prices break out above $2100 for gold and $28 for silver, the mining shares are going to once again see explosive rallies. Yes, that will again be great fun, and yes, I hope to participate. 

However, the simplest and by far best option for regular investors like me is the ownership of the physical metal itself. Physical gold and silver are their own asset class. They are money. They are financial insurance and your only protection against the madness of the politicians and their bankers. While investing in the mining sector can be fun and at times profitable, the single best alternative for most people, myself included, remains physical metal. 

Physical gold. Physical silver. Safely and securely stored. No headaches. No hassles. And no earnings reports that surprise to the downside.

Don’t miss a golden opportunity.

Now that you’ve gained a deeper understanding about gold, it’s time to browse our selection of gold bars, coins, or exclusive Sprott Gold wafers.

About Sprott Money

Specializing in the sale of bullion, bullion storage and precious metals registered investments, there’s a reason Sprott Money is called “The Most Trusted Name in Precious Metals”.

Since 2008, our customers have trusted us to provide guidance, education, and superior customer service as we help build their holdings in precious metals—no matter the size of the portfolio. Chairman, Eric Sprott, and President, Larisa Sprott, are proud to head up one of the most well-known and reputable precious metal firms in North America. Learn more about Sprott Money.

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Head shot of Craig Hemke

About the Author

Our Ask The Expert interviewer Craig Hemke began his career in financial services in 1990 but retired in 2008 to focus on family and entrepreneurial opportunities.

Since 2010, he has been the editor and publisher of the TF Metals Report found at TFMetalsReport.com, an online community for precious metal investors.

*The author is not affiliated with, endorsed or sponsored by Sprott Money Ltd. The views and opinions expressed in this material are those of the author or guest speaker, are subject to change and may not necessarily reflect the opinions of Sprott Money Ltd. Sprott Money does not guarantee the accuracy, completeness, timeliness and reliability of the information or any results from its use.

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