As the price of gold has surged for several years already there is common request to find the best gold stocks to have the possibility to participate in this strong rising uptrend.
There are three main ways to invest in gold and related securities. But they are not producing similar results.
Gold ETF is a commodity ETF tracking the price of this precious metal. The price of this metal is purely based on speculation and demand from buyers. The other two options, individual best gold companies or miners ETF have different backgrounds. All these shares are based on real companies. Companies with their own management, their own business model and their own costs and revenues.
Fundamental ideas for selection of best gold stocks
I have already written about ways of choosing the right silver mining companies. In terms of gold, there is naturally not much to add, as you can just swap the noun silver for gold and here you go. The very same logic and valuation principles apply. If you prefer to invest in this precious metal then it is definitely better to select a clear plain gold etf trading strategy.
But miner stocks could offer different reasons for trading them in short or mid-term period for possible swing or position trades. And the reasons are the same I already mentioned above. They are real companies. They have their own business model. They can surely make money when the price of gold is north of 1 500 USD per ounce. But these companies will make money also when the price declines to 1 000 USD per ounce or less.
Gold miners ETF
If you don’t want to select an individual stock but prefer to monitor the performance of whole sector representing gold mining companies (most of them dig silver too) then you can use exchange traded funds. There are two possible miner funds provided by Van Ecks ETF provider.
Market Vectors® Gold Miners ETF (GDX)
Market Vectors® Junior Gold Miners ETF (GDXJ)
Free stock screener for best gold stocks
There is the option to use technical analysis to select the best candidates from group of metal mining companies for trading. Sometimes it is better just to check the trend and then find the best gold stocks which are trending in the same direction. How to select such stocks?
I would use these basic parameters to find them:
- stocks must be liquid
- stocks have a price above 10 USD
- stocks must be in the gold sector of course
If you plan to buy such stocks a then I recommend evaluating the relative strength of these stocks. It should be done visually, but such stock should be above its 50-day and 200-day moving averages.
A free stock screener could be used in Amibroker, best stock analysis software. Or you can use some websites offering good stock screening, like FinViz.
FinViz stock screener looking for buy candidates produces these results:
Then you have to do stock chart analysis of every individual stock price chart and decide if it is possible
to find some good stock trade setup or not. Every setup must fit not only technical parameters but also money management rules and risk reward ratio.