RUA GOLD Corporation (CSE: RUA, OTC: NZAUF)
An Emerging Gold Explorer with Two Highly Prospective Land Packages in New Zealand’s historical gold fields.
Gold prices hit a record high of more than $2430 per ounce in mid-April before consolidation in recent weeks. Analysts believe that in the short term, the gold price has little momentum to reach new highs, but the medium and long term upward trend has not changed, so buying the dips is still a sound strategy.
Sprott Inc. managing partner, also a fund manager Ryan McIntyre recently accepted Kitco News interview and shared his view on gold investment. He believes that from the current economic cycle of the stock market valuation, investors should stay away from the S&P 500, and turn to investing in gold and gold mining companies, this is a “no-brainer” thing.
He added that precious metals investors are expected to continue to buy low in the market, which will continue to support prices at higher levels. Investment demand in the gold market has been relatively subdued over the past year, as rising interest rates have raised the opportunity cost of the precious metal.
McIntyre explains, “If you look at the Shiller P/E ratio, it’s currently trading at twice the long-term average. So the opportunity cost of holding these stocks is a little crazy right now. Imagine how much earnings would have to grow to consume these high valuations?”
On the other side, despite continuing to struggle with the Fed maintaining restrictive monetary policy, gold is well-positioned to take advantage of any new economic situation. If inflation rises, the Fed will be forced to raise rates again, and while this will increase the opportunity cost of gold, it will also affect stock market valuations. In other words, a rate hike would be negative for gold, but more detrimental to the S&P 500, while gold could still serve as a risk hedge against a sharp decline in the stock market.
U.S. Treasuries offer much less protection than they once did due to mounting government debt. As a safe-haven asset, gold may be the easiest solution. Although the price of gold is consolidating at this stage, it doesn’t take much new investment interest to drive the price back to all-time highs.
In addition to physical gold, McIntyre believes that investors should also consider holding shares in gold mining companies, because the valuation is too cheap. Especially after the world’s top gold producers reported solid first-quarter earnings, McIntyre pointed out that usually the first quarter sees the lowest production of gold mining companies, but this year’s situation is clearly much better.
Mining companies have had many shortcomings in financial management in the past, but have improved a lot in recent years. For investors, now that the gold mining sector is gradually stabilizing, with good profitability, coupled with cash flow growth, and there is no overheating of the market, making a perfect time to invest.
