Don’t Play This Dangerous Market Game
Dear Wealth Watch Reader,
Gold’s seeing a major resurgence right now. The yellow stuff’s per ounce value has risen from $1,287 to $1,333 since December.
Today, I want to talk about one of my favorite gold investments. One that could give you a nice double dip in profits.
Read on below…
Double Dipped Profits From This Gold Play
There are several reasons for the recent stock market correction, but chief among them have been fears of rising interest rates and inflation.
That’s why all eyes were focused on this morning’s release of the consumer price index (CPI) for the month of January.
Investors hit the panic button when the headline CPI clocked in at 2.1% year-over-year. This was higher than expected, and above the Fed’s longstanding target of 2%.
Note to the Fed: Mission accomplished, inflation has returned!
The trend toward higher interest rates is crystal clear.
Yields on the benchmark 10-year U.S. Treasury note have climbed from a low of 2.3% in December to nearly 3%!
That’s a whopping 26% increase in rates, which is really what’s spooking investors. And with good reason.
Income investors have been suffering through 10 long years of lousy yields ever since the Federal Reserve and other central bankers slashed interest rates to near zero in the aftermath of the financial crisis.
Real yields, after adjusting for inflation, actually went negative.
So folks looking for steady income can’t even keep up with the rising cost of living. The sad result has been a herd of desperate investors reaching for yield, which is a dangerous game.
Money has been pouring into alternative investment opportunities in hopes of bigger payouts.
But at times like this you want to be creative with your search for yields.
Don’t rush willy-nilly into high-yielding investments without doing your homework to make sure those dividend yields are sustainable.
And when market volatility spikes higher, as it has in spades, it helps to be well diversified in other assets besides just stocks and bonds.
Case in point: In a recent article I told you about a closed-end fund (CEF) that invests in some of the world’s biggest gold and silver stocks, the ASA Gold and Precious Metals Fund (NYSE: ASA).
Why precious metals?
History clearly shows us that during periods of elevated stock market volatility gold has outperformed stocks nearly 80% of the time.
That’s one reason why Goldman Sachs recently raised its 12-month price target for gold to $1,450 an ounce — up nearly 10% from here.
Of course, gold stocks offer you a leveraged bet on the price of gold itself — hence, even more upside potential for ASA than for the gold price.
And best of all, ASA is trading at an 11% discount to the net asset value (NAV) of the mining stocks it owns.
So you have the potential for a profit double play… as gold stocks rise in value amid higher market volatility and as the discount disappears when ASA trades back to its NAV again!
Later this week I’ll reveal another hard-asset investment that offers plenty of steady income potential and is also available at a discount.
Here’s to growing your wealth,
Chief Income Expert, Mike Burnick’s Wealth Watch
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