Are you looking forward to make money in gold stocks?
The exchange commission and securities are pretty much open in sharing the risks that are involved in investing with a penny stocks. Several financial advisers also talk about the risk of making investments with small gold mining companies. No doubt there are evident risks in purchasing the gold mining penny stock. However, if one makes through technical and financial research; there is definitely a way out to make money.
Risks involved in penny stocks: These are low priced stock that are usually traded below $5 each share. These are traded over the market. They don’t normally report the financials and hence information accessing becomes difficult. In addition to difficulty in accessing the information related to penny stocks these are involved in stock promotions that are called pump and dump schemes.
As soon as the price of the stock rises, the promoter will dump his share in the market and collect the payment from the sale proceedings driving down the prices. Penny stocks can be illiquid as well. It is possible when the stock is not actively promoted and there is not normal buying interest in the stock.
Gold mining stocks: Most of the gold mining penny stocks are small operations with reserves of gold. Some of the people may find enough profitable gold while other may not. It needs to be well kept in mind that profits in gold mines largely depend on the gold price which can fluctuate largely. Higher gold prices would attract miners. By the time mine will be produced the gold price will be below the required profit. Mining needs employees and heavy equipment. This shows that this overall operation is expensive.
Moreover finding the gold can sometimes be tricky and these stocks are traded on the Toronot Stock Exchange.
What one should look for? Gold mining stock recommends looking for the companies that have their own reserves. Inferred resources are not justified related to the investment. Minimum appropriate investment to have is at least 2 to 3 million ounces of reserves. You must be looking for an ore that produces minimum 2 grams of gold each ton with low production cost.
Look for the mining engineers with an experience of at least 10 years. Never forget to check the stock prices and then decide if you should buy the stocks or not.
Informed investment is a must: Uncertain economic conditions come with surge in goldbugs touting investment in the yellow metal. It is done in a way where personal wealth of the investors is protected against inflation. Little drop in dollar currency harm the nation. When commodity price of the gold rises; people are attracted towards the gold investment in hope to capitalize the concerns. As gold continue to rise in prices, old mines are re-opened and new mines will begin to develop. It is suggested to you to resist the sales in high pressure pitch and take time to call company and inquire about the reserves. The effort you will put in verifying the value of the mining company facilitates in reducing the investment risk.