It's no secret that I believe 2019 will be a good year for gold.
You see, the London Bullion Market Association (LBMA) polled 30 experts on expectations for the gold price in 2019.
Twenty of these experts expect the gold price to rise PAST $1,400 in 2019!
Only six of the 30 analysts expect the gold price to remain below $1,300 for 2019.
Ross Norman of Sharps Pixley, London's top bullion broker, forecasts a tight range for gold; $1,280 on the downside, a $1,410 high and $1,337 average. Norman has been the most accurate forecaster in recent years coming in as the outright winner five times and a runner up four times.
Adding to upside potential in the gold price is the weak rand. A weak rand, coupled with a strong gold price could mean parabolic returns for gold miners in South Africa.
At the same time Goldman Sachs increased its gold price forecast from $1,400 to $1,450.
That means upside potential of $170 from the current gold price…
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You could make a killing in this gold rally
Today, I want to show you an easy way to take advantage of this trend, with even more dramatic upside...
I'm talking about buying gold stocks.
Gold stocks aren't much different than any other type of stock. They just happen to be shares of companies that produce gold.
These companies mine the ore that contains the metal and sell it to refineries. The process is similar to producing oil or any other natural resource in the ground. It sounds straightforward.
Yet gold stocks perform better than gold for one simple reason: They offer leverage to the price of gold.
And the returns can be spectacular.
Say the price of gold rises from $1,300 to $1,400. That's roughly an 8% gain.
And it means if you own physical gold, you're up 8%.
But if you own a gold miner the return can be multiple times that…
Say a mining company sits on a million ounces of gold reserves in its mines.
If gold trades at $1,300, the reserves have a value of $1.3 billion.
If the miner can extract the gold at $1,250 an ounce – it stands to make $50 an ounce.
That is $50 million in total profit.
If however the gold price now rises to $1,400 – the miner stands to make $150 an ounce in profit.
So the total profit it can make from its reserves now sits at $150 million.
That’s a 200% increase in profit – from an 8% increase in the gold price!
That's the power of leverage in the gold market. A small increase in the price of gold can cause a gold stock to soar many times that amount.
During a gold boom, this effect can lead to even more spectacular gains.
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The current gold price means this tiny miner is coining it
With a gold price of R586,000/kg, tiny mining company, Pan African Resources is coining it.
In fact, at R550,000/kg the company’s newly constructed gold project would’ve paid for itself in less than four years.
But right now, with the gold price at R586,000/kg it is R36,000/kg higher! Considering the 1,741kg of gold the project will produce in year one – that’s an additional profit of R62 million!
The project I’m talking about is Pan Af’s Elikhulu project.
The project’s production cost for the life of the operation is estimated at $650 per ounce of gold. That means at the current gold price of $1,286 the profit is $636 per ounce.
Growth on growth is on the horizon for this gold miner.
In its latest results announcement, on 20 February 2019, Pan Af showed a 121% increase in earnings per share.
And that was without the effects of its Elikhulu project – or the higher gold price.
So, for 2019 it will see even higher growth with additional new production and a higher gold price in the fold…
This is definitely a miner to keep your eyes on.
Here’s to unleashing real value,
Editor, Red Hot Penny Shares