The Great Gold Debate

Gold continues to be a hot topic in the investment community as the precious commodity edges back towards its historical $1000 per ounce mark. As is the case with most conversations about markets, one side is bullish and the other side is bearish. In this instance, each side has a compelling argument.

“Gold Bugs”

The gold bugs are bullish on gold because of concern about inflation and a weak U.S. dollar. Much of this concern relates to the recent spending habits of the Federal Government, which is running record budget deficits in an attempt to stimulate the battered economy. Gold bugs are suggesting this will lead to runaway inflation as the printing presses move into high gear.

The Bears Strike Back

But the bears say this is hog wash, and that the recent deflationary cycle should continue to weigh on asset prices, including gold. Zacks analyst Paul Ramen underscored this notion, saying that “The USD will strengthen due to its safe haven status and rising confidence in President Obama. Inflation is nonexistent.”

Ramen also notes that slowing GDP growth in India, the worlds #1 consumer of gold, could have an impact on demand.

There is no way good way to settle the debate other than to step aside and let the forces of the market take over. For the time being, the bears are on the sidelines, waiting for prices to drop to initiate. But for the gold bugs who are ready to add to their positions, here are some destinations to invest in gold.

Gold Investment Destinations

Randgold Resources Ltd. (GOLD) posted solid fourth-quarter results on Feb 9 and painted an optimistic earnings projection, pointing to its strong balance sheet and expanding margins as primary drivers.

Yamana Gold, Inc. (AUY) provides some diversity because it mines copper in addition to gold. Either way, Yamana is bullish on 2009, with CEO Peter Marrone recently saying the company is “very well positioned for 2009,” due to its low cost basis.

Barrick Gold Corp. (ABX) has broad mining exposure all across the world in five different continents. The company’s low cash costs of $390 to $415 per ounce should help it stay ahead of the profit curve for another year.

SPDR Gold Shares (GLD) is a gold ETF that is tied to underlying gold prices. This is a great way to get exposure to gold without going through the cash markets and buying bullion.

Conclusion

All market participants have unique investment objectives. But regardless if you are bearish or bullish on any particular segment of the market, it makes sense to stay informed.

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