Picture this. You have gold bullions worth millions. Wouldn’t you be worried about the safety of your hard-earned fortune? You may spend sleepless nights over the security of your gold. In case you need money, selling them will not be very easy given that you will need to transact in bullions and not in a smaller unit. Wouldn’t it be easier dealing with some papers than enormous bars of the precious metal?

More and more people are being inclined towards investing in gold mining stocks than gold bullions. This article will discuss why you should buy gold mining stocks than gold bullions.

It is important that you consider certain factors before investing. You need thorough knowledge and understanding of mining to invest in gold mining stocks. Mining risks account for more volatility in the prices of stocks as compared to that of its physical counterpart, the gold bullion.

Easy trading: Wise investors usually hold a balanced portfolio of gold mining stocks and gold bullions, thus taking a calculated approach to gold investment. However, when it comes to the ease of gold trading, the stocks hold a much stronger place as against gold bullions. Gold mining stocks enable easy buying and selling in the market.

Reduced costs: Holding gold bullions will require you to spend a considerable sum in insuring the precious metal. Having gold stocks, on the other hand, does away with this high cost factor.

Fewer complications: Investing in gold mining stocks makes life simpler for you in the sense that you do not need to worry about the quality of gold involved. You will no longer have to test the purity of gold you own because your gold will now be in stocks not in bullions.

No storage issues: With gold bullions, you always have to worry about safe and secure storage for your gold. You also need to spend a large amount of money for the safety and storage of your gold. Investing in gold mining stocks does away with your storage concerns.

Easier transactions: While holding gold bullions makes it difficult to transact in any denomination, you can transact in the smallest unit of gold with gold mining stocks.

Easier resale: The resale price of gold bullions is usually less. Gold mining stocks do not suffer from this limitation.

Experts believe that an investment in gold mining stocks will reap higher returns than an equivalent investment in tangible gold. Though risky, gold mining stocks are considered to be worth investing in. It has been observed that the profits of mining companies are increasing at a more rapid pace than the prices of the products they are mining.

South Africa, the United States, and Australia are the three largest gold-producers countries. For decades,
South Africa has been the largest producer of gold. In 1970, the world owed two-thirds of its gold production to South Africa. In 2006, the gold production of the world was estimated to be 2469 metric tons, with South Africa, the United States, and Australia contributing 11.0%, 10.5%, and 10.2% gold respectively.

South Africa has been the largest producer of gold for more than a century. However, the gold production records last year brought China up to the first place. China has produced 276 metric tons of gold in 2007, thus contributing a significant 11.3% gold to the world’s production. South Africa produced 272 metric tons, followed by the United States with an estimated production of 255 metric tons and Australia with 251 metric tons.

The other gold producing nations apart from these countries are Canada, Peru, Russia, Indonesia, Tanzania, India, and Japan.

South Africa has been considered the country with the largest gold reserves in the world. It is said to have fifty percent of the world’s gold reserves. The gold mines at Boksburg and Carletonville are the biggest mines in the country and the deepest in the world. AngloGold Ashanti Limited and Gold Fields Limited are two of the big mining companies in the country.

Thanks to extensive foreign aid, China has been able to become the largest gold producer even with only seven percent of the world’s gold reserves. China’s CNGGC (China National Gold Group Corporation) is the biggest mining company in the country. The nation’s other mining companies include Zhongji Gold, Fujian Zijin Mining Industry Company, Lingbao Gold Company, and Zhaojin Mining Industry Company.

Most of the United States gold comes from Nevada, a state in the west of the country. The state is known for its open pit mines. The other gold producing states are Colorado, Alaska, Arizona, Michigan, Idaho, Georgia, California, Montana, Virginia, North Carolina, South Carolina, Tennessee, Pennsylvania, and New Mexico. The big mining companies in the country include Newmont Mining Corporation, AngloGold Ashanti, Barrick Goldstrike Mines Inc. Minera, Coeur d’Alene Mines Corporation, Kinross Gold Corporation, and Royal Gold, Inc.

Australia’s share in the world’s gold production started peaking up after the 1980s. The major gold mines in Australia are Super Pit and Sons of Gwalia mines in Western Australia, Cadia and Timbarra mines in New South Wales, Olympic Dam and Challenger mines in South Australia, Lasseter’s mine in central Australia, and Henty Gold Mine in Tasmania. The major gold mining companies in the country are Barrick Gold of Australia Limited and Monarch Gold Mining.

The 2007 gold production statistics estimate that Indonesia contributed 7.0% to the world’s total production of gold, closely followed by Peru with 6.9% and Russia with 6.2%. Canada produced 93 metric tons of gold, contributing 3.8% to the world’s gold. Other countries are estimated to have contributed 32.9% of the world’s gold.

AEM produces gold through it’s gold mining operations located in northwestern Quebec as well as mine construction projects in that same location. Agnico-Eagle is also mine construction projects located in Finland and Mexico with exploration operations in all of those countries as well as the United States.

Over the past year the companies stock as increased 86% fueled no doubt by the huge climb in gold prices. The company claims large potential for growth through press releases found on it’s website where Agnico-Eagle boasts that its largest mine is the 100% owned LaRonde mine. LaRonde is Canada’s largest gold deposit in terms of reserves. This has allowed AEM to have low operating costs and provide the company with other previous metals such as silver, zinc, and copper which are byproducts of the mine. Development at LaRonde is expected to keep the mine going through 2020.

Other gold mines the company is constructing hope to add to this growth and include Kittila in Finland and Meadowbank, Lapa, and Goldex in Canada. From 2006 to 2007 Agnico increased it’s gold reserves by 33% and looks to increase those reserves by 5 five over the next 2 years. They also are looking to produce over 350,000 more ounces of gold this year than they did in the previous year.

Their stock, however, appears to show this growth already factored into the price as it trades at a P/E ratio of 69. Is this a case of investors loving the stock because of it’s potential growth, or investors joining the bandwagon of buying gold in a bull precious metals market.