Why miners are the cheapest way to buy gold

A popular myth says that The Wonderful Wizard of Oz is a parable about the folly of putting your faith in gold. Try telling that to the investors who've been following the yellow brick road to safety of late. Or join them with our top gold stock tips.

One popular myth about The Wonderful Wizard of Oz is that it's a parable about the gold standard. Apparently, author L. Frank Baum wanted to bring his feelings about money reform to the masses believing that banks (the Wicked Witch of the East) and big-city financiers (the Wicked Witch of the West) had manipulated the gold-backed currency to such an extent that they had put the US economy in peril.

According to this reading, Dorothy's journey is about the folly of putting your faith in gold. But tell that to the hordes of investors who have followed the yellow-brick road to safety in recent weeks the spot price of gold has jumped to a 28-year high of $746 an ounce and JP Morgan Chase and Fortis are forecasting that it will hit $850 by the end of the year. Private investors now hold more gold in exchange-traded funds than the Japanese central bank has in its vaults. In much the same way that oil producers broke out once oil was holding steady at $50 a barrel, it looks like gold stocks are poised for some serious gains in the year ahead. With the gold price on the up and miners at their cheapest since 2003, gold stocks have become "the most attractive sector on earth", Tradewinds Global Investors' David Iben tells Bloomberg.

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Eoin came to MoneyWeek in 2006 having graduated with a MLitt in economics from Trinity College, Dublin. He taught economic history for two years at Trinity, while researching a thesis on how herd behaviour destroys financial markets.