This morning with the Fed on hold with their decisions on an interest rate hike, gold mining stocks have pushed much higher. My current holdings of GDX, GG, ABX, and even SIL (Global X Silver Miners ETF) have gained 3.6%+ and as much as 4.6%. There will be days that it will go down but I believe overall it will continue to rally as long as the Fed keeps pushing back the date for a rate hike and now it looks like they’re saying a December hike is at hand. In my opinion, once December comes and goes with the announcement of no interest rate hike, gold mining shares will soar along with the price of physical bullion.
Why I Believe No Rate Hike At All
I honestly believe that the Fed will not be able to raise interest rates anytime soon. Their balance sheet has grown to more than 4 trillion dollars since 2008 and there is no way that we could even afford a .25% rate hike let alone .1% in this environment. We can barely pay the current interest rates of close to zero percent on our national debt as it is. What makes people think that we could pay at any rate? This leads me to be a very strong investor of gold. If you have not read my reasons to why you should have gold in your portfolio for the future, you can find it here.
My First Gold Mining Dividend
I recently received my first dividend from GG (Goldcorp Inc) of $1.54 (monthly dividend) and while this doesn’t seem like much, I firmly believe that gold will do extremely well by the time I retire if I continue to reinvest. I am also very bullish on silver as it is viewed as a commodity and money. I will write more about it in the future but for now I’m focusing more on gold.
The price of gold mining stocks have taken a major beating the last couple of years where I find extreme value. Most dividend growth investors over look gold for their portfolios and I had the same inclinations at first but I’m starting to see a different light after receiving my first monthly dividend from GG.
Preserving Portfolio & Wealth
I am by no means a super gold bug (maybe just a little) but I am also a rational investor. In the beginning I wanted to sell my gold mining stocks when the price pushes higher to fuel my portfolio with more dividend companies but I’m realizing that I should make gold mining stocks a permanent allocation to my portfolio for insurance. Sure everyone won’t need gold as to a product manufactured from a consumer staples company but I view gold as money to weather the economic storms. If any volatility comes to the world markets now or in the future, gold is the best place to be as a safe haven.
The world has started dumping the U.S. Dollar. China, the world’s largest holder of U.S. treasuries (1.3 trillion) started to dump it starting back in August of this year. China’s foreign exchanged reserves plunged 94 billion dollars just in the month of August. Also, Russia and other countries have stopped using the dollar for oil trade. No one knows what will happen 5 to even 20 or more years from now but I’d like to be well diversified so that I can to protect my portfolio in the future.
History has shown that by having just 15% of gold mining stocks can protect your portfolio’s nominal value from plunging. Sure we dividend investors always say that we don’t care if our portfolio’s value drop but I tend to disagree. My strategy is to keep my overall portfolio’s value stable while investing in dividend stocks. I strongly believe that when it comes to the investment world, nothing should be ignored and the same should apply to gold.
So maybe give gold mining stocks a chance in your portfolio, especially at these rock bottom discount prices. As the world becomes more uncertain of its financial and economical situations, gold becomes that more attractive.