Monday, October 7, 2024

Read This Before You Buy a Gold Stock

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EDITOR'S NOTE

Long-time Liberty Through Wealth readers know that we don't often talk about gold here. Chief Investment Strategist Alexander Green has optimistic long-term view on the markets and therefore doesn't often feel the need to discuss gold as a hedge.

That said, Liberty Through Wealth's publisher The Oxford Club advocates that 5% of your overall portfolio should be in gold.

And right now, our good friend Karim Rahemtulla over at Monument Traders Alliance is extremely bullish on gold. So, for those of you who are curious about diversifying into precious metals, we're sharing an article from Karim on the topic today.

We hope you enjoy it!

-Rachel Gearhart, Publisher

THE SHORTEST WAY TO A RICH LIFE

The Most Critical Element in Any Gold Stock

Karim Rahemtulla, Head Fundamental Tactician, Monument Traders Alliance

Karim Rahemtulla

Everyone who follows me knows I like gold now.

I actually feel bad talking about it again because I've talked about it so much.

But the truth is if you were ever going to get into gold, I believe now is the time it will go higher.

Despite several factors working against it, gold keeps hitting records. Recently, the metal reached $$2,694.70 per ounce - a record high. The spike took gold's overall gains for the year to more than a fifth as investors keep upping their purchases.

This surge might seem confusing given the current economic situation.

After all, interest rates are high and gold doesn't pay a dividend.

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Inflation is also coming down, which means gold shouldn't be going up as purchasing power goes back up. So why does gold keep spiking?

I believe it's due to one big reason: We have so much debt on the books.

The current U.S. national debt is a little over $35 trillion and rising. That's nearly $105,000 per person in America.

People are starting to realize there are only two ways we can get our national debt under control.

One way is to raise taxes massively. The other way is to cut government spending massively.

Since neither of those are going to happen, we're going to have to inflate away the debt. This means putting pressure on the U.S. dollar, and because gold is tied to the dollar, the price of gold should go up.

I believe this phenomenon is why gold is going to take off. And if it doesn't go higher now, it's never going higher.

So if you're considering investing in gold, it's crucial to understand how it's valued so you can see your potential return on investment. One vital factor to look at is the cost per ounce.

Cost per ounce is the most critical item in any gold stock.

The cost per ounce Is crucial because gold is typically traded and priced on a per-ounce basis, making it a common benchmark for assessing its market value. In essence, the cost per ounce serves as a key metric for gold's market value and helps investors know the potential return on investment.

For example, if you look at the two big gold companies Newmont (NYSE: NEM) and Barrick Gold (NYSE: GOLD), the cost per ounce is somewhere around $1,200 to $1,400 for those stocks. That's what it costs to get the metal out of the ground and to the market, and then buy new property to discover new gold to replace what they've taken out.

Gold has been surging in 2024 and the cost per ounce is what you want to focus on to assess the value of gold stocks.

While you're researching gold miners, you can find this information in their most recent earnings report. I typically target companies that are in the upper 10% of margin.

I recently came across a company with an eye-opening cost per ounce ratio in Catalyst Cash-Outs.

Unlike Newmont and Barrick, this company's cost per ounce for gold is only $500 ONCE it starts mining the gold it has. That's good for a $2,000 profit margin! Because of this, I could see its stock reaching $100 or more in 5 to 10 years, and it could be a stock you buy for your grandkids.

Click here to unlock this once-in-a-generation gold play in Catalyst Cash-Outs.

Good investing,

Karim

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