The founder and chairman of Sprott Global Resources Investments tells you how he would invest in the yellow metal right now...
With gold prices near two-year lows through much of 2013, a bargain-hunter asked a show called Money Morning TV how to invest $100,000 into Gold right now. They called Rick Rule and here are his answers (you listen to his full answer on video below the written summary).
Rick Rule Says
1. he'd put at least 1/2 of the money into gold bullion. (Ed Note: A good article by Larry Edelson on The Wrong and Right Way to Buy Gold Bullion)
He would put the balance into the Equities and he would do it either by:
2. Selling puts on some of the bigger Gold Companies. This means if the price goes down he buys them for less than the current market. If the price doesn't go down he gets to capture the put premium. (Ed Note: An thorough article by Michael Campbell on How to use Options to Invest).
He would personally buy riskier pre-production companies that have very very very high quality preliminary economic assessment or pre-feasibility style numbers.
Sprott thinks that the major and intermediate mining companies will be forced back into the acquisition market in 9-12 months. These are assets that depreciate fairly rapidly and in order to maintain their production they are going to have to come back into the merger and acquistion markets. Rick also points out that it is currently cheaper to buy a stock on the Toronto Stock Exchange than it is to go out and find it. "So those look like the sweet spots to me".
Rick goes on to state that those unfamiliar with the sector need to understand one truism. If you think Gold is going up, buy Gold. Realize that "Gold Stocks do not necessarily mirror the price of Gold. You have to buy Gold Stocks because there is something intrinsic to that company where you believe that they are adding value relative to the rest of the sector. It is very, very critical that people understand that. That Gold Stocks are not a proxy for Gold. Gold is a proxy for Gold."
About Rick Rule:
Mr. Rule has dedicated his entire adult life to many aspects of natural resource securities investing. In addition to the knowledge and experience gained in a long, successful and focused career, he has a worldwide network of contacts in the natural resource and finance worlds. As Chairman of Sprott US Holdings, Mr. Rule leads a highly skilled team of earth science and finance professionals who enjoy a worldwide reputation for resource investment management.
Mr. Rule is a frequent speaker at industry conferences, and is interviewed for numerous radio, television, print and online media outlets concerning natural resource investment and industry topics. He is frequently quoted and referred by prominent natural resource oriented newsletters and advisories. Mr. Rule and his team have long experience in many resource sectors including agriculture, alternative energy, forestry, oil and gas, mining and water.
Sprott US Holdings is active in securities brokerage, segregated account money management and investment partnership management involving both equity and debt instruments, across the entire spectrum of the natural resource industry.
Contact: rrule at sprottglobal dot com