Gold has been the comeback story of the investment year to date. After falling for 4 consecutive years from $1895 in 2011, it bottomed in mid-December 2015 at $1050. Of course back then analysts were on TV predicting $6-700 gold within a year. That did not happen. At the time of writing gold sits comfortably around the $1340 price level.

What I find particularly interesting is that this is happening at a time when the S&P 500 is making new all time highs. Over the past 4 years, gold fell time and time again when markets went up and vice versa. That pattern now appears to be broken.

Given that gold is up $300 over the past 7 months (roughly 30%), the companies that make a living mining the yellow metal are up anywhere from 100-400%! Goldminers are a leveraged play on the price of gold. Meaning a 10% move in the price of gold can lead to a 30% move or more in the value of a gold mining stock.

The reason for this is quite simple. Many gold-miners operate with razor thin margins. When the price of their product spikes whilst their extraction costs remain the same, their profits … TO READ ON SUBSCRIBE AND BECOME A PATREON.

  • Max

    What do you think about buy physical gold ?

    • Too vague a question. Can you elaborate?

      • Max

        Buy gold coins or bars and have them physically

        • Doing so doesn’t give you any interest or dividends. There’s also the problem of storage which will either cost or if you do it at home, leaves you exposed theft.

          I prefer mining ETFs over physical gold.

  • Cecil J

    Hey Harald
    What’s a recipie for location independence? Is affiliate marketing dead ? Would freelance work on something like ODesk be better now?

    • Hard work! All roads still open 😉 But it’s harder than holding down a normal job for sure.

  • disqus_q14bh9K8Yv

    Harald, thanks for sharing your analysis and creating content.

    What is your idea about investing in VanEck now, I read a notice that prices might drop more in december, but iam not sure that fits the total curve.

    What is your idea about investing today (since I saw your important point about getting in early)

    All the best! Have a great one

    • I assume you mean VanEck’s ETF GDXJ and not VanEck itself (which is what you actually wrote). I never like to buy something that has just trippled. I will make a deeper analysis of Gold miners though in my podcast.

      • disqus_q14bh9K8Yv

        Yes a slight misstake, you’re on point!

        Thank you, iam listening to your newest Pod right now =)

        It will be exciting to see what opportunies Trumps win brings.

  • mazzyakella

    Always an interesting read, so are you back in Bangkok?
    Granted this articles was written a few months ago now and when prices are presumed low its always time to have your finger on the buy button.

    While the gold price ended 2016 higher than it began the year, the yellow metal was one of the weakest performers among major metals.

    Rising interest rates were the culprit. fourth quarter, gold was trading above $1,300 per ounce. It maybe worth remembering that the US central bank expects about three more interest rate hikes in 2017, increasing the opportunity cost of holding gold and threatening the case for gold as an investment.

    undervalued companies are likely to face near-term headwinds as rising Chinese and Indian jewellery demand is slow to replace shrinking investment demand.

    I know a lot of Thais are also expecting/hoping that Gold will be a good investment in 2017, anyways looking forwards to more of your investment articles in 2017. Oh and i loved your motorbike trip up North i watched every video and it was inspiring to say the least, i loved the part when you walk around the bike and there was no number plate, LOL from hua hin! Fantastic… It inspired me to dust off my old rather illegal grey import Honda hornet and buy a new 185 for her.

    Happy new year!

    • The bike series is not over. There’s at least 4 episodes left. Maybe more if I bother editing the footage I have.

      On Gold. Gold miners were the best performing stocks of 2016. Rising rates doesn’t have to be a headwind for Gold. Gold rose with rates in the 2000s. GDXJ is still up threefold from the bottom. On what the US central bank expects vs. what they do, that’s two different thinks. They’ve been touting and expecting several hikes per year for the last 3 years! i don’t pay attention to them. Gold will rally when the next recession comes (whenever that will be). I don’t mind holding for the next decade or two 😉

      Happy New Year!

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