Gold has been one of the best-performing assets on the market in 2016, and demand remains strong. That's why we are bringing readers the best gold investment to make now as demand continues to soar.
Demand for gold has been high in 2016 as both central banks and retail investors pile into the safe-haven investment.
You see, global central banks have flooded their economies with billions of dollars in attempts to spur growth. And in an effort to get individuals and businesses to spend more, a growing number of central banks have ventured into negative-interest-rate territory. About one-third of global government debt now has a negative yield.
So it's no surprise that gold demand has spiked this year. The surprising part is that central banks are driving demand. And while that may worry investors, it is extremely bullish for our best gold investment…
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Central banks around the world boosted their gold reserves 2.7% to 32,800 tons year over year (YOY) in July. That's according to a recent World Gold Council report. For the sixth consecutive year, central banks are net buyers of gold.
In 2015, central banks collectively bought about 483 tons of the precious metal. That was the second-largest figure since the end of the gold standard in 1971, according to Thomson Reuters GFMS.
Central banks now account for over 10% of actual gold demand. And that active buying from central banks will continue to be a key catalyst for gold prices in 2016 and beyond.
Russia and China's central banks have been among the most aggressive buyers of gold.
China grew its gold reserves by an enormous 70% in 2015 to about 1,800 tons. In Q1 2016, the People's Bank of China added 46 tons. China now has the world's fifth-largest gold stockpile. The country is accumulating gold as it deals with an economic slowdown and a devaluation of its yuan.
Meanwhile, Russia boosted its gold reserves by 18% YOY in Q1 to about 1,480 tons. A 50% decline in crude oil prices since June 2014 has severely dented Russia's economy and weighed on the ruble. Russia has the sixth-largest gold reserves right now.
"But it's not just central banks that have a hand in this highly performing sector," said Money Morning Resource Specialist Peter Krauth. "Germany's struggling, derivatives-laden Deutsche Bank AG USA (NYSE ADR: DB) disclosed in its own SEC 13F filing that it holds about $2 billion in gold and silver mining stocks."
These are all reasons we remain bullish on gold prices and gold stocks in 2016 and 2017. But there is one investment that trumps the rest. Here's the best gold investment you can make today to profit from soaring gold demand…
The Single Best Gold Investment to Make Now
The price of gold is up 23.7% year to date, and a number of gold stocks are boasting high double-digit gains in 2016. Still, gold stocks remain inexpensive.
"Gold stocks became obscenely cheap compared to gold in December 2015 and January," Krauth explained. "In fact, they were cheaper than at any time since the secular gold bull market began in 2001."
And gold stocks are extremely cheap right now according to the HUI/Gold ratio, which measures whether gold stocks are over or undervalued compared to gold.
"At the current ratio of 0.18, gold stocks are nearly as cheap as at the start of this gold bull," Krauth continued.
From the depths of the financial crisis in 2008 until gold entered a correction phase in 2011, the HUI/Gold ratio had an average of about 0.35.
"Starting from current levels, gold stocks would still have to double in price just to reach the average valuation they enjoyed post-crisis," Krauth said. "And that's after already doubling since late January."
That means investors are looking at a significant opportunity…
Krauth says the best gold investment to make now is the Sprott Gold Miners ETF (NYSE Arca: SGDM). This gold exchange-traded fund (ETF) provides what Krauth calls a great "one-stop shop" for gold mining stocks.
The ETF's performance tracks the Sprott Zacks Gold Miners Index, which is rules-based and operates on a quarterly rebalance. That means it is highly regulated and holdings are regularly reevaluated.
The portfolio is comprised of about 25 top names in the gold mining sector. Holdings are carefully selected based on revenue growth and balance sheet health.
When Krauth first recommended SGDM in early February, the fund went on to gain 32% over the next three months. Shares have backed off a bit. Investors can now buy shares close to where they were trading in May.
At $24.27, SGDM is up 90.63% year to date. And with gold demand still soaring, this remains the best gold investment to make now.
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- World Gold Council: Gold Demand Trends Q2 2016
- CNBC: Buy Physical Gold; Central Banks Are on Its Side, Jim Rickards Says
- Kitco: Live Prices