As gold prices drop from their lofty heights, some investors are wondering if it’s a good time to buy the precious metal. Sure, prices are cheaper now, but before loading up on gold, you’d be wise to first take a close look at your own portfolio.
If you’re invested in the Canadian stock market, there’s a good chance you already have some exposure to gold. The S&P/TSX 60 holds nine companies that mine or explore for the metal: firms like Goldcorp, Barrick Gold and Yamana Gold comprise more than 8% of the index. Some of these companies use futures to hedge their exposure to gold prices, says Laurence Booth, a professor at the Rotman School of Management, but their fates are still tied to prices because they produce more when gold is expensive. “You’ve got exposure to gold when you buy an ETF that tracks Canadian stocks,” says Booth, “so make sure you’re not double-counting.”