George Leong writes: I’m tired of reading and talking about the so-called “fiscal cliff,” but it could spell dire consequences for the economy if it is allowed to go through (and even if not). The reality is that America needs to stop printing money with no regard for the massive national debt load. Allowing the debt to continue to rise will punish the country’s future generations.

If we assume that the global economy will weaken, especially in the eurozone, the impact on global gross domestic product (GDP) growth would be negative. Stock values would fall, so you would need a safe haven to park your capital, which many of you know is in gold.

There’s been plenty of talk around here regarding gold and whether the precious metal is heading for $2,000. In my view, the current global risk will support and drive gold higher.

For any gold investor, the question is whether to buy the physical bullion or gold mining stocks. For the average investor, I favor gold stocks over the higher risk of other options.

The mining sector continues to be an excellent place to make money. An investment strategy would be to buy a mixture of exploration-stage gold mining stocks along with small to large gold producers. Under this scenario, you can play both the potential aggressive gains of exploration stocks and the steady returns of the large gold producers.

For exchange-traded fund (ETF) investors, the SPDR Gold Trust ETF (GLD) is worth a look and is currently trading in a sideways channel above the 50- and 200-day moving averages (MAs).

Chart courtesy of www.StockCharts.com

If you are looking at specific stocks, a top gold stock is Newmont Mining Corporation (NYSE/NEM), which in my view is one of the best stocks in gold, given its good price appreciation potential and dividend. Yet with earnings shortfalls in three of the last four quarters, Newmont is down to just above its 52-week low of $42.95 ; given the selling, I feel the stock has good above-average upside potential going forward.

Chart courtesy of www.StockCharts.com

Without a doubt, for those investors looking to hedge their portfolios with gold exposure, Newmont deserves to be at the top of the list. This company stands out among other players for two reasons: 1) size; and 2) low production costs.

Over the years, Newmont has grown rapidly through mergers and acquisitions, as well as the development of its existing reserves. This strategy resulted in the company’s diversified risks; namely, unlike junior producers, Newmont doesn’t depend on one or two of its mines for its future, and it is not exposed to politically unstable regions. The risk is spread out, as the company continues to maintain an aggressive worldwide exploration program and is actively participating in and taking advantage of the ongoing industry consolidations.

The company’s diversified portfolio of low-cost mines allows it to remain profitable, even during prolonged weakness in the gold bullion market. In the past 10 years, Newmont has posted net losses three times, yet each year it has generated positive operating cash flows.

Newmont is an ideal candidate for investors looking for a company with excellent fundamentals, a proven track record, and an experienced and knowledgeable management team. Note that this is only meant of an example of the type of gold stock you should be looking for, not as a buy recommendation.

Source: http://www.investmentcontrarians.com/gold-investments/why-gold-will-be-the-super-commodity/1089/

By George Leong, BA, B. Comm.
www.investmentcontrarians.com

Investment Contrarians is our daily financial e-letter dedicated to helping investors make money by going against the “herd mentality.”

Copyright © 2012 Investment Contrarians- All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

Only logged in users are allowed to post comments. Register/ Log in

The Market Oracle is a FREE Financial Markets Forecasting & Analysis web-site.
(c) 2005-2024 MarketOracle.co.uk (Market Oracle Ltd) - Market Oracle Ltd asserts copyright on all articles authored by our editorial team and all comments posted. Any and all information provided within the web-site, is for general information purposes only and Market Oracle Ltd do not warrant the accuracy, timeliness or suitability of any information provided on this site. nor is or shall be deemed to constitute, financial or any other advice or recommendation by us. and are also not meant to be investment advice or solicitation or recommendation to establish market positions. We do not give investment advice and our comments are an expression of opinion only and should not be construed in any manner whatsoever as recommendations to enter into a market position either stock, option, futures contract, bonds, commodity or any other financial instrument at any time. We recommend that independent professional advice is obtained before you make any investment or trading decisions. By using this site you agree to this sites Terms of Use. From time to time we promote or endorse certain products / services that we believe are worthy of your time and attention. In return for that endorsement and only in the cases where you purchase directly though us may we be compensated by the producers of those products.