Gold prices have stalled in recent days as investors have turned away from safe-havens and towards risk assets hoping the U.S. Federal Reserve will announce further monetary easing when it meets on September 20th. But one fund manager says now’s the time to invest in bullion and gold mining stocks.
“I think to wait is a little foolhardy,” Warren Gilman, Chairman and CEO of CEF Holdings told CNBC on Thursday.
“The opportunity is now, August was a tremendous sell-off,” he said referring to the decline in major stock indexes.
Gilman believes over the short-term gold stocks might be a better investment opportunity than owning gold itself, given that they have lagged the rise in bullion so far this year.
Over the course of 2011, gold is up almost 30 percent. Gold equities, however, measured by the Toronto Stock Exchange gold index are down 2.5 to 3 percent for the same period, according to Gilman.
“I wouldn't hesitate to step into the market and start adding to your portfolios right here,” he said. “I would take that trade [gold equities] probably for the next six to nine months, but for longer term I prefer the physical.”
Matthew Hegarty, Senior Equities Analyst at Global Value Investors thinks shares of the world’s second-largest gold mining firm Newmont are a particularly good buy, because of the firm’s dividend and healthy cash flow. Newmont has a dividend yield of 2 percent, according to Reuters.
“It’s a very cash flow friendly and certainly a shareholder friendly approach,” he said of the company’s strategy. “They've managed to maintain ahead of the cost curve as well.”
But Gilman warns that investors should focus less on the larger gold companies and go for the medium-sized producers, because they are likely to be the target of mergers and acquisitions activity in the sector over the next two years.
“I'd rather be the minnow that gets eaten by the whale, rather than own the whale,” Gilman said. “The big boys, like the Newmonts, will be buying the juniors and the medium-sized companies to add to their resources.”
Newmont is also listed on the S&P 500, and its shares are owned by a number of index players. So if the U.S. stock market sees another drop, the company’s shares would also suffer a sell-off, Gilman added.