Breaking News

5 Things Every Investor Needs To Know About Gold Mining

By Zacks Investment ResearchStock MarketsJun 28, 2016 04:49AM ET
5 Things Every Investor Needs To Know About Gold Mining
By Zacks Investment Research   |  Jun 28, 2016 04:49AM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items

Following the so-called “Brexit,” global markets slipped into mayhem and investors flocked to the safest harbors they could find. This rush caused gold to skyrocket 8% to $1,358 an ounce, the biggest one-day jump since 2008.

The transition from the risky world of stocks to the often-safer world of precious metals like gold can be confusing for investors who are less familiar with the commodity. Simply put, the business of discovering, producing, and selling gold is complicated and takes time to understand.

Of course, one of the most important aspects of gold trading is the actual mining of the product. Gold mining takes many forms, and mining companies can come in all shapes and sizes. For investors looking to get into gold, it’s essential to understand the mining industry and how it affects the price and availability of the yellow metal.

For investors looking towards gold after the Brexit, or for those just looking to become a bit more familiar with the mining industry, we’ve highlighted five of things every investor needs to know about gold mining below.

1. Know Your Type

There are two main types of gold mining. Placer mining is the discovery of gold as it accumulates through gravity during the sedimentary process. Typically water is involved, and placer mining includes techniques like panning and dredging. This is typically not a large commercial practice and only makes up a small piece of the gold mining industry.

Most of the world’s gold supply comes from hard rock mining. Instead of looking for gold in loose rocks or sand, hard rock miners literally chisel or detonate actual rocks to remove the gold. A lot of hard rock mines are underground and consist of elaborate tunnels and vents, but aboveground mines, called open pit mines, are also a source. Gold can also be produced as a by-product from hard rock mines that are focused on other minerals.

2. Exploration

Gold mining companies are typically separated into three categories. The first is called an exploration company. As the name implies, these companies search for and discover new gold deposits. They typically don’t have many assets and own only what it takes to drill for and find gold.

In 2015, the gap between the global demand for gold and the supply of the resource from mines was 1047 tons, up from 663 tons just a decade earlier. As the world’s existing mines shrink and demand climbs, the need for exploration companies grows. This group of companies is tracked by the Global X Gold Explorers ETF GLDX.

3. Development

After the discovery of gold, the next step in the process is for a development company to come in and set up a mine. Sometimes exploration companies attempt to turn into development firms, but development companies often just buy the proven deposits from discoverers. The key here is that development companies will only set up shop on land that is known to have gold.

4. Production

The final category of companies are production companies. These are the big boys of the industry and include giants like Barrick Gold (NYSE:ABX) , Goldcorp (NYSE:GG) , Newmont Mining (NYSE:NEM) , Polyus Gold (OTC:OPYGY) , and Newcrest Mining (OTC:NCMGY) , among others.

These massive companies basically do it all and will extract, produce, and sell gold. Again, mining companies come in all sizes, but some of the most frequently traded are going to be these blue chip stocks.

5. Gold Survey

Similar in manner to a farmer’s almanac, the GFMS Gold Survey is followed closely by gold investors. This manual includes the latest information on mine production, scrap recovery, price outlook, bullion trade, fabrication demand, and official sector demand (another way of saying how much banks and financial institutions are buying).

Other Things To Note

As mentioned above, banks and other financial institutions will buy up gold, and it’s important to note that gold is considered an international currency. In other words, a bar of gold should be worth the same price in the United States and Hungary, for example.

It’s also important to note what gold is used for. The majority of gold that is actually produced into something goes towards jewelry. Tooth fillings, computer parts, and other miscellaneous memorabilia also make up a large chunk of the industry.

Finally, investors interested in gold should go into the market with a clear plan. Some highly ranked gold mining stocks right now include B2Gold Corp. (NYSE:BTG) and Pretium Resources (TO:PVG) , which both have a Zacks Rank #1 (Strong Buy). You can also check out our guide on Gold ETFs.

PRETIUM RES INC (PVG): Free Stock Analysis Report

NEWMONT MINING (NEM): Free Stock Analysis Report

BARRICK GOLD CP (ABX): Free Stock Analysis Report

GOLDCORP INC (GG): Free Stock Analysis Report

B2GOLD CORP (BTG): Free Stock Analysis Report

GLBL-X GOLD EXP (GLDX): ETF Research Reports

Original post

Zacks Investment Research
5 Things Every Investor Needs To Know About Gold Mining
5 Things Every Investor Needs To Know About Gold Mining

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind: 

  • Enrich the conversation
  • Stay focused and on track. Only post material that’s relevant to the topic being discussed.
  • Be respectful. Even negative opinions can be framed positively and diplomatically.
  •  Use standard writing style. Include punctuation and upper and lower cases.
  • NOTE: Spam and/or promotional messages and links within a comment will be removed
  • Avoid profanity, slander or personal attacks directed at an author or another user.
  • Don’t Monopolize the Conversation. We appreciate passion and conviction, but we also believe strongly in giving everyone a chance to air their thoughts. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at’s discretion.

Write your thoughts here
Are you sure you want to delete this chart?
Post also to:
Replace the attached chart with a new chart ?
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
Are you sure you want to delete this chart?
Replace the attached chart with a new chart ?
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.
Continue with Google
Sign up with Email