Gold equities offer best exposure to gold

In recent weeks gold has tested support at $1400/oz. For many gold pundits who see gold as a source of security, they were surprised to see it break a support level of around $1520/oz. At the end of the day, we are in an inflationary environment. Governments are resorting to QE to stimulate the global economy suffering from high asset prices. The equity markets are looking 'peakish' given their profit results were achieved in an environment of QE, so there is downside to the Dow. Having said that, this is not a time of labour union power, so we are not going to see high inflation expectations. On the country, we are going to see a continuing erosion of Western 'unskilled' wages and continued real wage growth in developing countries. Given the lack of 'wage demands', there is every reason to expect govts to resort to more QE if there is any sign of slack. I would even expect them to manage any fall in equities which was destined to undermine confidence. This will be needed since 'system trading' tends to result in corrections. Downside in gold simply makes it better value. If its sold off, its sold off for its strength, and can be considered a buying opportunity.
With interest rates at record lows, there are few places to hold money and make a return. Need you worry about any investment? Well, equities are yield paying, unlike gold, but consider:
1. Emerging gold producers like Gryphon Minerals are strongly discounted because they are mere projects, but will be very lucrative in the wake of further QE. We still have some years of 'rot' before we are going to see 'real' upside in equities. This is a 'super-cycle' so don't think there is some crisis unfolding...at least not for around 20 years.
2. Gold equities are actually 'earners' unlike the commodity. Gold merely needs to make sense in the future, and since this low interest environment is set to persist for years, one is best off trusting in gold equities rather than gold.

One however cannot discount the fact that you can short-trade equities. But what of the QE impact on your money. QE could result in a Dow of 20,000 points in a few years, due to inflation. Its all a lottery, and the trick is to invest in what is most tangible. Discounted gold in the ground for 'non-traders' I would suggest offers the greatest flexibility.

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Author Andrew Sheldon| Applied Critical Thinking | www.SheldonThinks.com