Should You Buy Mining Stocks, or the Metal Itself?
Which is Best? The Metals or the Miners?
Both the physical metals themselves, AND the mining companies, will benefit from changes to the price of the commodity. Whether talking about gold, pork bellies, silver, palladium, platinum, or any commodity (from coffee to cotton), there are a few very important considerations.
In general, the prices of the penny stock mining companies will increase or decrease by a larger percentage amount than the actual metal itself.
This is because of the profit margin increase. If gold (for example) rises 10%, then since the extraction costs are set, the boost to profit margins could be extreme… such as 200%. Thus, the 10% surge in the price of the metal actually translates into a significant gain to the penny stock’s profits.
However, one issue that all businesses have, which the commodities do not face, would be company-specific risks. Commodities do not embezzle money, or make bad business deals, or get sued, or have to deal with employee deaths, etc…
More great videos about how to profit from penny stocks, and specifically some of our favourite gold and silver and precious metals penny stocks we like: