Written by Robert and Russell Markham
Last week, in the 1st part of our 3-part series on Australian mining stocks, we looked at Lithium shares and from Tuesday 17 October 2017 to Tuesday 24 October 2017, GXY.AX has continued to power on, up another 7%. But, as we stated last week, Lithium stocks are for more aggressive/speculative investors!
This week we will look at Gold shares listed on the ASX.
Gold is considered by many investors to be a safe haven in times of economic and political uncertainty and it often outperforms during periods of risk-off or where the market is looking for safety. Gold can also be used as a hedge against potential inflation. Investors can buy Gold bullion, Gold coins or they can invest in the shares of Gold mining companies.
Using VectorVest we can find a list of Gold shares in a matter of seconds. By clicking Viewers on the main tool bar, then clicking on Sector Viewer. Double click on the Materials Sector, then double click on the Materials (Gold) industry. This will bring up a list of the 173 Gold stocks tracked by VectorVest.
As of 24 October 2017, the top 3 Gold stocks were Northern Star (NST.AX), Saracen Mineral (SAR.AX) and Regis Resources (RRL.AX). Let’s look at how these 3 stocks have performed since the start of the year: NST.AX is up over 42%, SAR up over 49% and RRL over 31%! Not bad when the VVC/AU has gone up 8.56% over that period.
To identify the best companies in the Gold industry, ensure you sort the stocks by our Master Indicator, VST, for the best combination of Value, Safety and Timing (our default sort). Of the top 5 listed VST Gold stocks at present, the one that stands out is Regis Resources, it has a VST score of 1.26 and graphing the stock’s EPS (our 12-month leading indicator on earnings) shows smooth rising earnings since March this year. VectorVest gives us the power to drill into the Gold industry and dig out the best Gold nuggets in seconds!
When considering a Gold stock in Australia be aware that the company may also be in the business of mining and exploring for several other precious metals.
You do need to understand your risk appetite and investment style before investing in Gold shares. These stocks are typically very volatile, as is the price of Gold. Just graph the top few stocks in the Materials (Gold) Industry. They are not for the short-term risk averse and tend to be held by those who are looking for insurance against political and economic uncertainties and by those who believe the potential long-term rewards are worth the risk and volatility.
If Gold bullion interests you, you can consider a Gold ETF instead of investing in Gold bullion. This will provide exposure to the performance of the price of Gold bullion. These ETFs are backed by physical Gold bullion and some hedge their US dollar exposure back to the Australian dollar. Gold ETFs come with a number of risks, particularly in periods of financial crisis and these risks need to be clearly understood. To find a Gold ETF, go to Viewers on the main toolbar, click on Sector Viewer, then double click ETFs, then double click ETFs (Commodity). This will bring up the 10 commodity ETFs we track, 8 of which include Gold. You should graph them for price behaviour to see if you can accept any volatility and check liquidity by looking at trading volumes.