How do I Choose the Best Gold Penny Stocks?

A. Leverkuhn

Choosing the best gold penny stocks is often a difficult job involving careful research, good asset allocation strategy, and overall acknowledgment of investment risk. Some investors are lured to these kinds of smaller stocks by the technical possibilities of big gains if the overall price of gold goes up, but some experts caution beginners to look at some of the inherent risks of gold penny stock trading. Choosing gold penny stocks requires mixing general penny stock tips with specific knowledge and analysis of gold as a commodity and the volatile market around it.

Stack of gold bars.
Stack of gold bars.

One way to choose gold penny stocks is to look at the actual operations of the company that is offering the stock shares. Penny stocks are usually the stocks of less established companies: some of the main risks with these companies include more vague price changes on untested information, challenges in observing the true accounting of a business, and sometimes, a difficulty in actually selling shares after a price increase for profit taking. One of the ways to limit these kinds of risk is to look into where the company operates and what it does. With some specific information on mines, retail spaces, or other aspects of a gold related company, the investor is armed with more actual knowledge to use in making critical buying and selling decisions. Gold stocks are often based on an entirely physical process, getting gold from the ground, but any “additional operations” can affect overall price quite a bit.

Penny stocks are stocks that have a relatively low cost per share.
Penny stocks are stocks that have a relatively low cost per share.

Another big tip for choosing gold penny stocks is to look at a specific time frame. Some experts will counsel new investors to “go long” on a smaller gold stock, which means buying in at a generally low position and waiting patiently for stable growth, sometimes related to either successful mergers or new gold veins, rather than trying to “time the price” and make a quick sale for gains. Some larger stocks can allow for short term day trading gains, but according to some of the professionals who keep the closest eyes on the market, gold penny stocks and other smaller offerings may not present those same opportunities in a useful way.

When looking at the context for gold, investors should understand all of the different ways that commodities are traded. It helps to know about how parties around the world value raw gold, how gold has historically been traded, and what kinds of factors contribute to price changes for gold stocks other than just the price of raw gold. Commodities markets have been vulnerable to a lot of price speculation, and that’s extremely important to know about for gold stocks. Investors can look into what small gold stocks are likely to do by performing additional research on past gold prices, looking at options for “long” and “short” gold positions, and generally making informed plays on the value of a gold related business.

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