With economic uncertainty looming in 2022, many investors are turning to gold as a safe haven asset. Gold has long been valued for its ability to retain purchasing power over long periods of time. As we enter a potential period of inflation and market turbulence, allocating a portion of a portfolio to gold can provide downside protection. When investing in gold, investors have a few options – they can buy physical gold, invest in gold ETFs, invest in gold mining stocks, or seek out deeply undervalued opportunities related to the gold market. This article will explore investing specifically in gold nuggets – an alternative gold investment that can provide huge upside if the investor finds a deeply undervalued opportunity.
Investing in physical gold nuggets requires extensive research to avoid frauds
Unlike investing in standardized gold coins or bars, investing in gold nuggets requires extensive research by the investor. There is potential for buying fake gold plated nuggets or pieces with far lower gold purity than expected. Investors must thoroughly vet any gold nugget provider and get multiple independent verifications of the gold purity. If real nuggets can be reliably sourced, they can sometimes be purchased at far lower premiums over the melt value of the gold content compared to fabricated gold products like coins. This leaves room for huge upside when the nugget is eventually resold.
Seeking deeply undervalued gold mining stocks provides asymmetric upside
For investors looking to allocate to gold but avoid the storage and authentication issues of physical gold, investing in gold mining stocks can provide similar exposure. Gold mining stocks often see amplified moves versus the price of gold – providing asymmetric upside if the investor picks an deeply undervalued gold miner. The collapse in gold prices in 2013 led many gold mining stocks to fall far below reasonable valuations. Savvy contrarian investors were able to recognize these opportunities and generate massive returns as sentiment recovered in the gold sector.
For investors looking to allocate a portion of their portfolio to gold, seeking deeply undervalued opportunities can provide asymmetric upside versus simply buying gold ETFs. However, careful research is required to avoid frauds or impure gold products.