Market Vectors Gold Miners

Market Vectors Gold Miners… A Conservative Blue Chip Stock

by Alexander Green, Chairman, Investment U
Investment Director, The Oxford Club
Monday, June 30, 2008: Issue # 814

Fed Chairman Ben Bernanke is caught between a rock and a hard place right now.

Sure, he would prefer that you focus on “core inflation,” since it excludes sharply rising food and oil prices. But we all have to eat and consume energy. It’s just a matter of time before core inflation starts rising alongside corn, wheat, beef and prices at the pump. Ordinarily, the Fed would start raising rates to stave off higher prices.

But Bernanke really doesn’t want to be an inflation hawk right now. Raising rates would only make the already weakening economy weaker still. (Never good in an election year.) If Bernanke has to choose between a weaker economy and moderately higher inflation, I believe he will choose higher inflation, hoping that he can put the genie back in the bottle once the economy is growing again.

Since gold traditionally rises with inflation, that means now is probably a good time to add Market Vectors Gold Miners to your holdings.

Essential Facts About Gold

Here are the essential facts about gold:

At one time the world’s monetary system was based on gold.
It is a universally recognized store of value.
Gold can be bought and sold in any country.
And it is scarce.

There are 4 billion ounces of gold in people’s hands, enough to fill a cube 60 feet on a side. Of this, investors own one billion and central banks another billion, with the remainder in jewelry and other baubles. Last year more than 80 million ounces were extracted worldwide. Two-thirds went to jewelry makers and the rest to bullion.

If you want to own gold that you can touch, you can buy bullion. But there will be a markup when you buy it or unload it - and fees to store and to insure it. The same is true of coin investing, especially with numismatics.

Understand, too, that while gold has been in a major uptrend over the past few years - hitting an all-time high of $1,030.80 on March 17 - shares of the natural resource companies that bring the gold to market have performed considerably better. That isn’t likely to change.

Over the past 50 years, major gold mining companies have risen at an annual rate of approximately 12%. That’s better than the return of the S&P 500, although the trade-off has been head-snapping volatility along the way.

Market Vectors Gold Miners - A Conservative Blue Chip

Perhaps the most conservative way to buy blue chip mining stocks is to plunk for a few shares of Market Vectors Gold Miners (AMEX: GDX).

Market Vectors is linked to the AMEX Gold Miners Index and owns all of the world’s leading gold and silver mining companies. That means you can capture the performance of the entire sector in a single, well-diversified investment.

The annual expense ratio is one half of one percent. The shares can be margined or sold short - and there are options available for traders. (The Top 10 holdings include Newmont, Freeport McMoran, Barrick Gold, AngloGold, Harmony Gold, Kinross, Yamana, Gold Fields, and Agnico.)

But perhaps you’re really bullish on gold right now and prefer to invest in a portfolio of potentially higher returning junior producers or small- to mid-size gold miners.

Not a bad idea. But, in that case, I would suggest you talk to an expert like Rick Rule, one of the world’s leading natural resource analysts…

Rick Rule - Dedicated to The Raw Materials Industry

Rick Rule has dedicated his entire life to all aspects of the raw materials industry. His knowledge is unmatched, in my view. And his connections in the industry span the globe.

Understand that the resources industry is a highly specialized field. To be successful here, you need to know a lot of crucial information about geology, mining technology, financing, and quality of management. Since I don’t have that knowledge myself, I’m unwilling to throw out the names of a few resource companies and wish you luck.

You’re better off dealing with someone with a deep understanding of the global resource market. Rick’s firm Global Resource Investments specializes not just in gold and silver, but base metals, oil and gas, forestry, agriculture and water investments. For more information, contact them at 800.477.7853. (Outside the U.S., call 760.943.3939.)(Please note: Although Rick Rule is a top-rated speaker and exhibitor at our conferences, IU does not receive compensation from any relationship you may establish with his firm.)

Right now the economy is weak - and the outlook for inflation is poor. But this is creating plenty of investment opportunities - if you know where to look.

So pick up a few shares of Market Vectors Gold Miners - or talk to a resource broker and tell him Ben Bernanke sent you…

Good investing,

Alex

Alexander Green’s recommendations have beaten the Wilshire 5000 Total Market Index by more than 3 to 1 over the past five years. To get access to a steady stream of the companies he expects to outperform this year, consider joining The Oxford Club, our premium service. You’ll get immediate access to all of Alex’s growth-stock recommendations.

Today’s Investment U Crib Sheet

Rick Rule recently spoke at our 10th Annual Investment U Conference in St. Petersburg. Just go here to find out more about the Investment U Conference and Rick’s specific natural resource picks.
Jim Rogers doesn’t believe the commodities boom is over, “especially when you look at growth rates in China, India, the Middle East, North Africa and throughout most of the developing world, where demand for just about every commodity is rising at unprecedented rates.” Jim Rogers‘ thoughts on China are just as relevant now as they were when he sat down with us.
Last week, Alex reviewed the few attractive options left for investors in the markets right now. In Investment U Issue #811, you’ll learn the ultimate inflation hedge for you portfolio.