o3 BLOG | Investing
Should I Invest in Gold in 2021?
The Summer Olympics in Tokyo might be over, but it’s not too late to build a winning portfolio with gold. For thousands of years, gold has reigned as the most popular investment. Gold attributes much of its value to its versatility — it was one of the world’s first currencies and has been a symbol of power, purity, and wealth in many civilizations throughout history. As a physical asset, gold is unique — it does not corrode or tarnish, allowing it to offer sustainable value. Gold is highly liquid as a luxury good and also as an investment. Gold investments are a cornerstone of a strong portfolio, acting as a diversifier and a hedge that mitigates loss in times of political and economic uncertainty.
Benefits of investing in gold
- Gold holds its value over time and increases during times of crisis
- Considered the ultimate safe-haven asset
- In comparison to other financial products, gold delivers competitive returns on investment
While many reasoned investors recommend dedicating 10% of your portfolio to gold investments, there is another way to benefit from gold’s rising demand without actually investing in the precious metal. Gold mining stocks offer a more accessible entry point and can deliver a significantly higher rate of return in comparison to gold futures or gold bullion. Gold stocks don’t represent any actual gold ownership but rather shares of a company involved in the mining and production. The gold mining industry is expanding rapidly, and according to mining.com, we can expect gold production to grow at a CAGR of 2.9% at 124.1 million ounces by 2024. The tech sector is scaling rapidly, and with technological advancements comes the need for gold. The continual demand and scarcity will accelerate the growth of the mining industry, which will result in substantial returns for investors in this arena.
One main drawback of investing in physical gold is that it lacks growth potential. If you bought a one-ounce gold bar a decade ago, the bar’s value would have gone up, but it is still the same one-ounce gold bar — it didn’t multiply or get heavier. As safe as an investment, physical gold is unproductive, and you will not likely see significant returns in a short period. However, gold mining companies are operations whose primary objective is to expand over time, offering investors returns from increasing production. And as mining companies discover new resource deposits, investors can expect very lucrative returns.
Many investors have proven that the rewards of investing in junior mining companies outweigh the risks, but that’s not to say there aren’t key things you should look out for before you invest. When you’re researching gold exploration and junior mining companies, paying close attention to some key factors can make the difference between a podium finish and going home empty-handed.
- An experienced management team
Behind every successful mining company is a solid management team with years of expertise. Many junior mining executives come from larger mining companies and bring a wealth of knowledge to ensure sound business practices and strategies to provide optimal returns for their shareholders.
- Is the mining company well-financed?
Many junior mining companies lack the funds to carry out long-term exploration plans, which bottleneck operations or, even worse, bring them to a grinding halt. Junior mining companies with the financial means to implement extensive drilling programs and expand mineralization are your best bets.
Junior mining companies who communicate openly can offer more insight into their mining operations. And because junior mining companies have smaller management teams, it’s easier to learn who is who within the organization. Look into any news interviews surrounding a junior’s drilling results, and you will get a clearer picture of future mining plans, resource deposits, and anything that will cause their stock price to increase.
- The company’s commitment to ESG.
A company that focuses on its social and environmental impact can signal the sustainability of future operations and that surrounding communities can thrive.
While we have made a lot of progress since the beginning of the pandemic, the threat of uncertainty still looms. And although the value of gold’s upward trajectory might have slowed over the past month, it is expected to gain momentum as the global political climate heats up. With market experts anticipating the price of gold to double within the next 3 – 5 years, investing in a promising junior gold mining company can help secure your financial future.
O3 Mining is committed to delivering maximum returns for its shareholders. Let’s work together to diversify your investment portfolio.
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