Gold prices in 2017 are up 7.9% to $1,243.50. And Money Morning Resource Specialist Peter Krauth sees the price of gold rising to $1,400 by the end of the year.
That's a solid 12.6% return for investors who buy physical gold right now.
But the gold mining sector is an even more lucrative place to invest your money. As gold prices rise, companies that mine for the metal will have bigger profit margins on each ounce sold. That will provide a generous boost to their stock prices.
Today, we're going to break down why gold prices will rise in 2017. Then, we'll provide one of the best gold stocks to buy in the mining sector.
Here are two factors that will boost the gold price this year...
2 Factors Fueling the Rally in Gold Prices in 2017
The first factor is gold's increasing attractiveness as a safe-haven investment.
You see, a safe haven is a type of investment whose value increases or stays the same when the broader stock market becomes volatile. For example, if the S&P 500 drops more than 1% in a single day, investors who own a safe haven like gold can hedge against those big losses.
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Volatility could be right around the corner now that we're at the end of a very long bull market. Investors enjoyed a record rally since the election, with the Dow Jones soaring to an all-time high of 21,000 on March 1. But since then, the index is down 1.7%. It even posted eight straight days of losses from March 16 to March 27 - the longest losing streak since 2011.
Investors might be selling off because they think the market is overvalued. This sentiment indicates the market is in a bubble.
And what do investors do if a bubble burst may be on the horizon? They find a safe haven like gold that either maintains its value or increases in value when the stock market drops.
3 Catalysts That Will Boost Gold Prices in 2017
And investors have been pouring money into gold investments recently. Data from January shows the 10 biggest gold ETFs saw inflows of $1.6 million. That's just in one month.
More people moving into gold investments indicates long-term bullish sentiment in the gold market. That means the price of gold is poised to rally this year.
The second catalyst behind gold prices in 2017 is inflation, which currently sits at a five-year high of 2.7%.
Inflation is one of the reasons why the Fed raised interest rates on March 15. Since rising inflation lowers the purchasing power of the dollar and hurts the economy, it's the Federal Reserve's job to fight inflation by raising interest rates.
When the health of the economy is jeopardized by inflation, investors often think volatility is on the horizon. That urges them to buy gold and gold stocks.
While physical gold is a good long-term investment, it's not as liquid as gold stocks, meaning owning physical gold won't produce profits right away. Gold bullion can also be difficult to store and maintain over time.
That's why we think gold mining stocks are a better investment. These companies' profits will grow as the price of gold increases this year.
Here's the best gold mining stock to buy this year, which could soar as much as 91.9% in the next 12 months...
The Best Gold Stock to Buy in 2017
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We recommend investing in Goldcorp Inc. (NYSE: GG).
Yes, it wasn't the best-performing gold stock of 2016. The stocks of other gold mining companies, like Newmont Mining Corp. (NYSE: NEM) and Agnico Eagle Mines Ltd. (NYSE: AEM), did much better. Those stocks beat GG by 72% and 42.6%, respectively.
Despite that, Money Morning Executive Editor Bill Patalon considers GG his favorite gold stock. That's because it has a very low all-in sustaining cost (AISC).
The AISC is a metric telling us how much a company spends to get an ounce of gold out of the ground. In other words, it's the operating cost applied to the gold fields. Goldcorp's AISC is $812, one of the industry's lowest. At the current gold price, Goldcorp gets $438 in return for every ounce of gold it produces.
And with gold prices in 2017 projected to rise to $1,400, the profit margin will only expand. By April 2018, analysts see Goldcorp shares costing as much as $28 each. That's a stunning 91.9% return from the last closing price of $14.59.
With analysts expecting it to nearly double its current price, it's clear GG stock is one of the best gold investments of 2017.
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