Should you bet on Gold Stock in 2017?

Should you bet on Gold Stock in 2017?

It has been said that one of the best investment strategies is go purchase assets which are reviled by the majority of investors. This means the assets which make people seriously question your mental state. However, some of these investments can turn out to be the most lucrative. Think of the Indian rupee, which hit a low in 2008. Since this point, the currency has gained 12% against the American dollar. Its value has also surged against the value of European stocks and bonds during the development of discussions regarding the potential break-up of the European Union. Since then, the Euro stock has climbed by around 45% and investors around the world are looking to jump on the bandwagon.

It has been prophesised by Asia Continental that commodities are, at present, a more prospective profit area. In the article, they go into more information about these 'commodities' being mainly gold stocks, or junior gold stocks. The gold mining market has been reduced 80% on the value at which it peaked in 2011. A number of factors have been attributable to the decline, including the falling price of gold, production shortfalls, diluted capital raises, cost blow-outs and too many oil salesmen disguised as CEOs.

However, it could be analysed that there is a chance for things to pick up, and there are a number of signs which may demonstrate this. Bad management practices are being eliminated, capital expenditure programs are being removed, there have been fewer capital raises and shareholder returns are being given even higher priority by boards. The valuations placed by various junior gold minors are also beginning to look really good, with discounted prices going as low as US$700 per ounce, which seems to significantly minimise an investor's risk.

The price of gold has been on a long streak of success, with 12 straight years of growth in US dollar terms. With the market going how it is, this streak is very unlikely it continue. It is necessary to be completely aware of the main factors which influence the price of gold:

  •  -  The 'fear trade' - The prospect of finance systems crumbling and currencies being backed by gold again.
  •  -  Negative real bond yields - In this case, the opportunity cost of holding gold becomes negative.

However, these factors are undeniably taking a turn for the worse, which definitely sheds a more negative light on the market.

As the same time, the demand and supply of gold are starting to look less favourable. The World Gold Council has told that gold mining increased 4% in quarter three of 2013 against the same period the previous year. Gold mining projects are continuing to be commissioned alongside the declining price.

With the supply remaining relatively high, the demand for gold is lessening. This is particularly evident in the country which was the world largest gold market - India. High excise duties and importing restrictions have been implemented by the government in order to reduce the amount of gold imported and therefore to improve their national account balance. These actions led to the slumping by 32% in Indian gold demand during the third quarter of 2013. It is expected that the decline will be further accentuated as we reach the end of the year. India's average control of global golf averaged at 38% over the past half-decade, but is not as low as 21%.

The question remains to be answered. Is this the end of the thriving gold market? However, with the current state of the world's financial markets, who knows what the value of gold will be a few years from now. You might be better off ditching the gold and trying to make money on online bingo sites! With so many new bingo sites 2017 like this one you won't be short of choice!

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