Investors Are About To Reap Huge Gains From These 'Gold Vaults'

An image of people surrounding a sheet of paper with many charts on it
Credit: Shutterstock photo

It's more true in this sector than any other... an informed investor is a successful investor.

It's important to know the commodities market backward and forward -- what's going on right now, what's happened in the past, what the future holds and why .

As I mentioned in an earlier issue of StreetAuthority Daily , there's a trigger ready to be pulled in the gold market, and it could send prices soaring.

But rather than just buying physical gold, I'm taking advantage of this opportunity in another way -- one that could lead to much greater gains and even pay dividends.

You see, copper, gold, silver-- these hard resources will never go away. It has to be found, it has to be mined and it typically has to be processed in some way or another. This is where the wealth can really be made from commodities.

#-ad_banner-#That's why I believe with the recent events going on in China, well-positioned gold producers are one of the best places to have your money in over the next twelve months.

Here are a few reasons why.

First and foremost, gold miners can do something no other kind of company can do -- store the wealth that they create through their labor.

These firms already hold huge stockpiles of gold bars -- yet most investors don't think of gold miners as producers of money. Instead, most investors have the impression that gold miners are just like many other manufacturers: making a product that gets sold; creating a revenue stream (paper money) which they assume is the real asset of the business.

But such a simplified view doesn't hold true when the product is gold.

What gold miners actually do is not selling... but trading. They exchange one form of money -- the one they create out of the ground -- for printed currency.

They do this because it's what their investors want. By exchanging gold for dollars, they create the best form of value in the eye of today's investors.

Imagine if a miner decided to stop exchanging its gold for dollars , letting the stacks of bullion in the company's vaults simply grow larger and larger.

It would be exactly the same as if the firm were piling up dollars inside a bank account -- valued added but without the checking fees.

What's the key difference between storing gold and other products? Or you might ask, why has gold been the most reliable source of value in the history of civilization? Two big reasons:

First, gold has lasting value.

Most products have a shelf life, so over time their value decreases. Food spoils. Metals like copper and iron corrode. Technology makes products obsolete.

Just imagine if you tried to hoard Betamax players and Tab cola to store your wealth during the crisis of the early 1980s. Sure they had value at the time, but when the buyers moved on, those "commodities" became worthless.

Gold, on the other hand, is what people seek when they don't know what they want. When they need to safeguard their accumulated wealth until a need arises to spend it.

Second, gold is portable and easily stored.

Think about it like this. Right now, $1,300 could buy one live cow, 325 gallons of gas, 650 cartons of eggs or 185 pounds of coffee. Or it could buy a single, one-ounce gold coin that can fit in your pocket.

That gold coin sounds like a much easier way to carry and store $1,300 worth of value.

Both of these qualities -- lasting value and easy storage -- make gold the only product that can be reliably stockpiled to store wealth.

When you invest in gold companies, you are effectively buying "gold vaults" that store massive amounts of value.

This is a major reason why gold producers are minimally impacted by economic recession or depression.

During the 2008 crisis, for example, gold held its value better than almost everything else. From its pre-crash peak of just over $1,000 per ounce, gold fell less than 30% in the crash.

As the following chart below shows, gold was superior to other investments, which plunged 50% to 80%.

Most of gold's decline came not from a loss of intrinsic value, but rather temporary price distortion caused by panic selling by speculators. Once this knee-jerk selling was finished, it took just nine months for gold to regain its pre-crash high. By September 2009, it was back above $1,000.

By contrast, it took copper 24 months to crawl back to its pre-crash high. The Dow took an even longer 48 months to recover. And assets such as crude oil and emerging-markets shares still haven't regained all the losses they suffered.

You see, when there's an economic downturn, investors flock to safety, pouring their money into gold to preserve wealth. Gold prices rise as demand increases.

Because gold producers stockpile gold, these companies also grow in value. And when gold is worth more, every ounce of gold they mine in the future will give them rising amounts of profit, creating even more value.

And that's when investors see the stock gains in their brokerage accounts. In my latest research for example, I explain how if events carry out in China and gold skyrockets, two gold producers I'm targeting could see gains anywhere from 97% to 218% over the next 12 months.

By owning these companies, you're in a position to do something no one else can do -- create cash at times when it's most precious.

Put simply, when you invest in gold companies, you own a "gold vault" and a printing press of wealth. You control your monetary destiny at a time when most people will be left helpless to watch their wealth swept away in a torrent of default.

And today you can buy gold companies at some of the lowest valuations I've ever seen.

P.S. -- As I mentioned, there's something big brewing right now in the gold markets. China has been quietly stashing away gold... and when news releases that the majority of gold is no longer for sale, prices will skyrocket. When this happens we could see gold miner shares soar over 218% within the next year. To help you take advantage, I've put together a special report detailing the best miners poised for the coming "Shanghai Spending Spree." To get the names and ticker symbols of these gold stocks just follow this link .

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

© Copyright 2001-2016 StreetAuthority, LLC. All Rights Reserved.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

Other Topics


Street Authority

Founded in 2001 by industry veterans, StreetAuthority is a financial research and publishing division of Investing Daily. Our mission is to help individual investors earn above-average profits by providing a source of independent, unbiased — and most of all, profitable — investing ideas. Unlike traditional publishers, StreetAuthority doesn’t simply regurgitate the latest stock market news. Instead, we provide in-depth research, plus specific investment ideas and immediate action to take based on the latest market events.

Learn More