Monday, 28th November 2005 (3947 views)

US experts have reached loggerheads over whether gold investors will do better to opt for gold bullion or in shares mining companies as the yellow metal hovers at an 18-year high.

With mining companies returning higher profits and demand for gold currently greater than supply, more investors are being tempted to take shares in gold firms.

The world's third biggest gold miner Barrick recently recorded a three-fold jump in quarterly profits, indicating that the industry's top guns are on good form.

But as gold inches up to the $500 an ounce marker, some commentators assert that the advantages of investing in mining companies have disappeared.

"We have done better owning gold than shares," industry expert Jay Taylor told the Daily Times.

"In the 1970s there were dramatic profit margins - a 10 percent move in the gold price would result in maybe 30 percent increase in share price. If anything, it's gone the other way and now there are shrinking margins."

Fans of gold bullion also point out gold mining firms have also recently been hit by higher fuel costs.

Onlookers have also tried to predict how the gold industry landscape will develop following a recent string of acquisitions.

Some experts suggest the acquisition fever will only accelerate as top outfits continue to buy up undeveloped mining sites in order to meet the market's current high demand.

 

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