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What Are Gold Mining Stocks?

2 min read

The world of investing in gold is not that simple. Of course you can choose to buy physical gold, of which coins and buying gold bullion are the most common. But once you have got the taste of the precious metal, named by some the Precious King of Metals, there is no stopping there. By the accounts of some investors, the moment you hold your first gold coin in your hands is a life changing moment. You have no escape but to go on betting on it. Most of us have grown so used to seeing the price of gold soar that we do no longer consider investing in gold as a bet. The most experienced however, know that gold like all other commodities can be behave in mysterious ways.

The most common forms of gold investing are gold coins, gold stock, online gold investing and gold bullion. Before you embark on either of them you first need to consider issues such as convenience or convertibility. For instance, if you buy the raw metal you may encounter serious storage and maintenance problems. The same happens with gold jewelry. The advantage though, is that they are extremely liquid.

Investing in gold mining stock, though, has become increasingly popular not least that business people need not worry with the logistical issues of taking care of their physical gold. One of the downsizes of buying mining shares is that the investor gains exposure to the volatility in the gold price. Other disadvantages may refer to the fact that there is no telling of how much gold a mine still has. The common way of the prospectors to determine the quantity of gold in a certain mine is by taking random samples and then measuring the gold concentration in the sampled rock. The finds are somehow biased since it is the prospectors` job to talk investors into putting their money in the future mine.

And there is a whole set of engineering problems that can set back the profits of the company and thus the price of the shares and your profit. The overall customers` sentiment over how gold was extracted has come to play a major role in hoe mining companies do. Increasing awareness over environmental dangers linked to mercury or cyanide based mining can adversely impact the company`s prospects.

The main advantage though, is the money one stands to earn from investing in gold shares. Being more sensitive to the movements in the price, investors can cash in on their investment a lot faster. On top of that shares are values based on the profitability of the company which means, at least in theory, that if gold is doing well on the market than a gold-backed share will rise in value higher than a gold bar.

Jack Wogan

All content in this article is for informational purposes only and in no way serves as investment advice. Investing in cryptocurrencies, commodities and stocks is very risky and can lead to capital losses.

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