Four undervalued gold investments to buy before their prices climb high provide prospective owners of the precious metal a chance to profit from price appreciation.
BofA Global Research is among the investment firms that are forecasting a rise in gold prices during the second half of 2024. The four undervalued gold investments to buy may climb if the Federal Reserve cuts interest rates later this year.
Gold also can serve as a hedge against geopolitical risks. Such threats to peace have occurred from Russia’s expanded invasion of Ukraine and the Oct. 7 attack and murder of 1,200 civilians in Israel and more than 100 others later died from injuries related to the attack. In addition, Hamas militants kidnapped 250 others, as well as committed rapes and sexual violence in starting a war in the Middle East that has led to 27,585 deaths in Gaza, as well as the wounding of nearly 67,000 people.
Gold traditionally performs well during geopolitical upheaval, inflation and U.S. dollar depreciation, so the precious yellow metal often is bought as insurance during tumultuous times. Gold is viewed in many parts of the world as a way to shield savings from a possible bank crisis or even government confiscation of traceable personal assets in certain countries. Plus, a recent report by BMO Capital Markets found that the price of gold is no longer driven by real interest rates.
Four Undervalued Gold Investments to Buy: Fearless Forecasts
Several investment firms are recommending the purchase of gold, wrote Frank Holmes, the chief executive officer and chief investment officer of U.S. Global Investors (NASDAQ: GROW), a provider of eight no-load funds and two exchange-traded funds that feature precious metals, natural resources and emerging markets. One example is XIB Asset Management, a Canadian hedge fund that soared over 200% in the first two years of the pandemic, and forecasts that gold and uranium will outperform the market if the Fed cuts rates.
That view may seem counterintuitive, especially with rates still above 5% and the stock market at an all-time high, but analysts at JPMorgan forecast that the precious metal will benefit later this year from Fed rate cuts and heightened demand for the shiny asset.
Four Undervalued Gold Investments to Buy: Futures Contract Hits High
The active month gold futures contract for the most volume/open interest closed last Dec. 1 at an all-time of $2,091.70 per ounce, a comfortable $16 per ounce break above the prior all-time record close of $2,075.20 per ounce on August 6, 2020, Jim Woods wrote to subscribers of his January 2024 Successful Investing newsletter. However, the breakout to new highs occurred as the active month futures contract was rolling forward from the December 2023 contract to the February 2024 contract. Secure storage costs result in higher back month futures prices, Woods explained.
At the end of November 2023, the premium of the February contract over the December contract topped $20 per ounce, which is more than the $16 per ounce breakout beyond the 2020 highs. Thus, without the extra $20 per ounce storage costs built into the February gold contract, gold would not have topped the 2020 highs, Woods wrote.
“The recent volatility in the yellow metal has resulted in gold becoming a popular investment topic,” Woods opined.
Confirmation of the rising interest in gold comes from a new survey. The survey found that the most searched personal investment in the United States is gold. The precious yellow metal has amassed an average monthly search volume of 1,191,827.
Gold is a commodity that trades based on supply and demand; the ratio between supply and demand determines the price of gold at the time of the investment, the survey researchers wrote.
With the elevated interest rates and the continual concerns of a recession in the United States, gold can be a reliable long-term investment and outperform other assets such as properties and different equities since it is easier to liquidate, the survey researchers wrote. There are also tax advantages in gold investments, since prices of the precious metal jumped considerably in 2023 and have shown staying power compared to other markets.
Four Undervalued Gold Investments to Buy: Newmont
One undervalued way to invest in gold is through Denver, Colorado-based Newmont Corporation (NYSE: NEM), the world’s largest gold company. Newmont not only produces gold but silver, copper, zinc and lead.
The company, the only gold producer listed in the S&P 500 Index, has its mining assets in “favorable” places in Africa, Australia, Latin America & Caribbean, North America and Papua New Guinea, its management indicated. Despite gold rising, Newmont is among many precious metals mining stocks whose share prices fell by double-digit percentages during the past 12 months.
Woods and his partner Mark Skousen, PhD, co-heads the Fast Money Alert trading service, produced a 22.71% return for their subscribers by recommending Newmont slightly more than two months between March and May 2020. Fast Money Alert also turned a profit of 58.33% by advising subscribers to buy Newmont call options in January 2015 before recommending their sale roughly three weeks later. Skousen, a Presidential Fellow at Chapman University who also is a scion of Ben Franklin and sometimes impersonates his Founding Father ancestor, also has led the Forecasts & Strategies investment newsletter for the past 44 years.
Skousen wrote in his February 2024 Forecasts & Strategies investment newsletter that gold remains above $2,030 an ounce. Skousen continued that he expects gold to rise in the next year.
Chart courtesy of www.stockcharts.com
Another fan of Newmont as a turnaround opportunity is Michelle Connell, president and owner of Dallas-based Portia Capital Management, LLC. But mining stocks carry risks, she added.
Despite the availability of investing directly in gold mining companies that are publicly traded, they can be “very volatile,” Connell counseled. Such gold mining stocks can fall with the whims of the stock market, as well as face the ill effects of geopolitical threats that can disrupt gold production in certain countries, she added.
Michelle Connell leads Dallas-based Portia Capital Management.
“If someone is an investor who wants access to physical gold, they’re going to pay in excess of $2,000 an ounce,” Connell said. “That is not convenient for most individual investors.”
The stock is selling at its lowest price-to-earnings (P/E) ratio in five years at 15.30 x forward earnings, Connell told me. Newmont’s average P/E is 25, she added.
Income lovers will appreciate Newmont’s dividend yield of 4.65% that is supported by strong free cash flow estimated at $3.7 billion for 2024 and $4.5 billion for 2025, Connell continued.
Currently, NEM’s “all-in” cost of production for gold is $1,400 per ounce. With gold selling at close to $2,000 per ounce, NEM has strong profitability, Connell stated.
Since gold is estimated to rise to $2,500 per ounce, Newmont’s profit margin could go higher. The company is scheduled to report financial results on Feb. 22.
“Given it is short-term downward trend, I would dollar-cost average into a position over the course of the next few months,” Connell counseled. “Several analysts estimate that there is 20-35% upside over the next 12-18 months. I agree with them.”
Four Undervalued Gold Investments to Buy: CEF
A second undervalued gold investment to buy is Sprott Physical Gold & Silver Trust (CEF), a current recommendation of Bryan Perry, who heads the Cash Machine investment newsletter. Even though CEF does not pay a dividend, the other 31 Cash Machine holdings are sufficient to bring the average dividend yield to 10.44%.
Bryan Perry heads Cash Machine, averaging an 10.44% dividend yield.
CEF is a closed-end trust that invests in “unencumbered and fully allocated” physical gold and silver bullion in London Good Delivery bar form, the company posted on its website.
The goal of CEF is to provide a convenient and exchange-traded investment alternative for investors who want to hold physical gold and silver without the inconvenience that is typical of a direct investment in physical bullion.
Chart courtesy of www.stockcharts.com
Three Dividend-paying Gold Stocks to Consider Purchasing: Pre-1934 Rare Coins
Aside from buying gold stocks and funds, consider purchasing gold and silver coins from a reliable dealer, such as Van Simmons of David Hall Rare Coins, of Santa Ana, California.
By far the best value in holding physical gold would be the older pre-1934 gold $20 Liberties and Saint Gaudens, Simmons advised. For the last seven or eight years, there has been a big influx of the importation and repatriation of the coins back to the United States from foreign lands, Simmons added.
“If you just look at the extra fine grade $20 Liberties — struck from 1850 to 1907 — for the last 40 years or so, they have always had a big premium on them,” Simmons said. “It typically ranged from 75% to 125% over the spot price of the spot price of gold. Most people don’t realize the majority of the old $20s were always used by foreign countries as their gold hoards. It was the easiest way for them to hold their gold. They were holding gold in a form struck by the most powerful nation on earth.”
In 1933, when gold was outlawed, all the U.S. coins fled to Europe and South America, Simmons explained. They have always been used as interbank transfers between businesses and governments, he added.
The circulated coins now trade at about the same premium over the spot price of gold as a newly minted gold coins, Simmons added.
Van Simmons, of David Hall Rare Coins, said investors are buying gold as an “island of safety.”
Four Undervalued Gold Investments to Buy: Perth Mint/Asset Strategies International
Another path to invest in gold can be found with the Perth Mint in Australia, facilitated by Rich Checkan, president and chief operating officer of Asset Strategies International, a full-service, tangible asset dealer in Rockville, Maryland, close to where I live. Asset Strategies International offers precious metals, pre-1933 U.S. gold and silver coins, as well as world and ancient coins.
For investors who seek to buy precious metals, Checkan said “one of the safest” ways to do so is through the Perth Mint Depository Distributor Online (PMDDO) program. The program allows investors to buy and sell gold, silver and platinum securely and directly online seven days a week, 24 hours a day at some of the lowest premiums in the industry, Checkan added. The precious metals also can be stored at the Perth Mint. In some cases, there is no storage fee.
“Just like investors can log into their brokerage account and buy and sell ETFs, investors can do the same with their PMDDO account,” Checkan said.
Four Undervalued Gold Investments to Buy: Online Access
Once logged into an account, Perth Mint investors see both their live cash and bullion balance, and have the option to purchase, sell, or withdraw metals they own. When clients make a purchase or a liquidation through the program, the metals are automatically added to or withdrawn from their account. Clients who want to take delivery of their metals should receive their shipment within 10 business days.
“Looking at the worst case for the PMDDO, there is a 1% premium to gold or silver when buying and a 1% discount to gold or silver when selling at the minimum transaction of $50,” Checkan said.
Aside from a straight price comparison, the Perth Mint program helps to mitigate the risks of liability, security and delivery, Checkan continued. The world’s only government guarantee provides Perth Mint clients a safe storage option, Checkan added.
“All in all, PMDDO is the clear winner when compared to other forms of physical precious metals ownership,” Checkan said.
Rich Checkan, president and chief operating officer of Asset Strategies International.
Dividend-paying Gold Funds Offer Another Alternative
Bob Carlson, a former pension fund chairman who now heads the Retirement Watch investment newsletter, is recommending gold though a trust. In the February 2024 issue of Retirement Watch, Carlson advised his subscribers that gold continues to deliver “solid returns,” even though it had a slow start in the initial weeks of 2024.
“I believe gold’s recent strength is due largely to international tensions and not economic fundamentals, Carlson wrote.
Bob Carlson, who heads Retirement Watch, answers questions from Paul Dykewicz.
Geopolitical Risks Worsen
In the Middle East, the United States responded militarily on Feb. 2 to the killing of three American service members in Jordan on Sunday, Jan. 28, by striking 85 sites in Iraq and Syria used by Iranian forces and Iran-backed militants. U.S. military forces hit targets at seven facilities involved in attacking U.S. personnel in the region, National Security Council spokesman John Kirby said. The targeted facilities included command and control operations, intelligence centers, rockets and missiles, as well as drone storage sites.
President Joe Biden said in a statement that the military responses will continue selectively.
“The United States does not seek conflict in the Middle East or anywhere else in the world,” President Biden said. “But let all those who might seek to do us harm know this: If you harm an American, we will respond.”
The Israeli Defense Force (IDF) continues to take out Hamas leaders who are hiding in neighboring Gaza after orchestrating the Oct. 7 attack mainly against civilians in Israel. A potential hostage exchange between Israel and Hamas is under discussion but remains elusive.
The IDF successfully carried out a raid at a hospital in Gaza on Monday, Jan. 30, where a Hamas leader was hiding. That leader and two other Hamas militants at the hospital were killed by Israeli forces.
With world leaders expressing concern about the deaths and escalating violence in the region, the International Court of Justice ordered Israel on Friday, Jan. 26, to limit deaths and damage but did not demand a cease-fire in the Palestinian territory.
A lasting peace remains uncertain in the Middle East where militant groups like Hamas in Gaza have a goal of annihilating Israel and killing its people. Based on reports from the Hamas-run Health Ministry and other sources, more than 90,000 people have been killed or injured since Hamas militants sparked the latest war in the Middle East with its Oct. 7 attack. An IDF official said its military response is aimed at eliminating the threat posed by Hamas militants rather than await the next one without attempting to stop further incursions.
The four undervalued gold investments to buy provide a hedge against geopolitical risk at a time when wars are worsening in different regions of the world.
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Paul Dykewicz, www.pauldykewicz.com, is an accomplished, award-winning journalist who has written for Dow Jones, the Wall Street Journal, Investor’s Business Daily, USA Today, the Journal of Commerce, Seeking Alpha, Guru Focus and other publications and websites. Attention Holiday Gift Buyers! Consider purchasing Paul’s inspirational book, “Holy Smokes! Golden Guidance from Notre Dame’s Championship Chaplain,” with a foreword by former national championship-winning football coach Lou Holtz. The uplifting book is great gift and is endorsed by Joe Montana, Joe Theismann, Ara Parseghian, “Rocket” Ismail, Reggie Brooks, Dick Vitale and many others. Call 202-677-4457 for special pricing on multiple-book purchases or autographed copies! Follow Paul on Twitter @PaulDykewicz. He is the editor of StockInvestor.com and DividendInvestor.com, a writer for both websites and a columnist. He further is editorial director of Eagle Financial Publications in Washington, D.C., where he edits monthly investment newsletters, time-sensitive trading alerts, free e-letters and other investment reports. Paul previously served as business editor of Baltimore’s Daily Record newspaper, after writing for the Baltimore Business Journal and Crain Communications.