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Although physical gold has been hailed as a great long-term investment and hedge against inflation, the best gold miner to invest in can offer even better returns than the precious metal itself. Gold mining stocks are outperforming the spot price of gold so far in 2017 by a wide margin.
Gold prices are currently up 6.3% this year to $1,223.90 per ounce. On the other hand, the Gold Bugs Index (HUI) – which tracks the price of gold mining stocks – is up 6.5% over the same period. While that's not a huge outperformance, we expect one gold miner in particular to skyrocket over the next year.
In fact, analysts see shares of this company rising 55.5% to $22 per share by May 2018. That's a huge profit you can't miss this year.
Here's the biggest reason we're bullish on our gold mining pick – and therefore bullish on gold prices – in 2017…
1 Reason Why Gold Prices Will Keep Heading Higher in 2017
According to Money Morning Resource Specialist Peter Krauth, the price of gold could rise 14.4% to $1,400 by the end of the year. The biggest reason we're so bullish is steadily rising inflation.
The most recent data from March shows that the annual inflation rate is 2.4%. That's one of the highest levels seen since 2012. One of the duties of the U.S. Federal Reserve is to manage high inflation through interest rate hikes. The Fed raised rates in both December 2016 and March 2017. Now, interest rates stand in the range of 0.75% to 1%.
However, the Fed believes that could still be too low. That's why Fed Chair Janet Yellen has repeatedly said there may be up to three more rate hikes in 2017.
Interest rate hikes often boost the value of the U.S. dollar. However, that hasn't been the case over the long term. The U.S. Dollar Index (DXY) is down 2.5% to 99.60 basis points since the Dec. 14, 2016, rate hike. When the dollar weakens, the gold price increases because the metal becomes more affordable for other currency users.
Don't Miss: How to Buy Gold and Silver in 2017 – Free Guide
Rising inflation also has a negative effect on the economy because it means consumer prices across the economy are rising. The higher the cost of consumer goods and services, the less likely consumers are to spend, inevitably leading to a slowdown in economic growth.
Investors are more likely to sell their stocks amidst a slowing economy out of fear that the value of their assets will plummet. As we've said before, a stock market drop typically boosts demand for physical gold due to its strong hedging qualities – when the markets go down, the gold price often goes up.
While you could buy physical gold, gold mining stocks are a much better investment. The profit margins for these companies will only grow bigger as the price of gold increases.
With that in mind, here's the best gold mining stock to invest in…