Amid media speculation of major outflows from China stemming from investors sending money abroad, Jim Cramer says the money is going into gold.
One Wall Street Journal headline in particular, "China, Fighting Money Exodus, Squeezes Business," caught Cramer's eye. It described how the Chinese are trying to move money abroad, and the government is getting nervous and starting to crack down on capital outflows.
"To my eyes, the big takeaway from this piece is 'buy gold.' Why? Because I think a lot of the money that is fleeing China is going into gold," the "Mad Money" host said.
I think a lot of the money that is fleeing China is going into gold.Jim Cramer
It made sense to Cramer that a Chinese investor would be worried about its devalued currency and slowing economy, thus they would want to hide cash in a hard asset like gold that can retain its value in times of economic chaos.
This would also explain the rally in the precious metal in the past three months.
"I am a big believer in the idea that you should always have some gold exposure simply as a kind of insurance for the rest of your portfolio against inflation or global economic weakness," Cramer said.
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When investing in gold, Cramer recommended putting money directly into bullion. And if you do not want to pay a fee to keep an actual commodity at a depository, he recommended the ETF called GLD that tracks gold prices.
But for those who are willing to take more risk and chase greater rewards, there was only one gold miner that Cramer was willing to bless.
RandGold Resources has various properties across Western and sub-Saharan Africa and a solid balance sheet, but it is the action in the stock that excited Cramer. It has been hit with five straight downgrades, yet it continues to go higher.
Normally, when a stock is hit with a downgrade, some bruising occurs. But RandGold's stock refused to go down. In fact, it is up 42 percent in the last three months.
"When I see this stock taking punch after punch from the analysts and continuing to rally, that tells me RandGold is pretty much the only growth gold miner out there — the one the big boys can't get enough of, and they don't care one whit what Wall Street thinks of it," Cramer said.
Some of the strength in the stock could also be correlated to the strength in gold prices; yet Cramer found that the rally is also related to the positives within the company itself. RandGold has a strong track record of growth in its production, which is expected to increase by an additional 16 percent in 2017.
"In short, if you are going to take a risk of owning a gold miner instead of the actual commodity, RandGold is the only way to go, because it is head and shoulders above the competitors," Cramer said.
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