A Different Way to Invest in Gold

When people think about investing in gold, they think of the traditional methods. These methods include gold bullion and coins along with gold stocks, funds and exchange traded funds.
There is another way to invest in gold that is rarely though about...that is investing into emerging market economies with large gold mining sectors.

The countries where the gold mining industry makes the biggest contribution to GDP are not places where you may think of like South Africa. But it is smaller countries such as Mali and New Guinea where gold a big part of the nation's GDP. Other countries where gold mining contributes a decent percentage of GDP include Tanzania, Ghana, Uzbekistan and Peru.

In Tanzania, for example, the value of gold exports has tripled over the past five years to $1.5 billion. And this is due solely to rising gold prices.

Of course, to further benefit from the expansion of the gold mining industry, these frontier market countries will need to continue stabilizing their politics and also put in more incentives, such as tax breaks, for overseas mining companies to establish operations in their country.

Since these are frontier markets investors may wonder to invest into their gold mining sector. The best way to do that is through gold mining companies which are heavily exposed to these countries.

One example is AngloGold Ashanti ADR(NYSE: AU) which has invested in Ghana, Mali, Tanzania and Guinea in the past few years. It also started exploration activities in Gabon and the Congo.

Another company to consider is Harmony Gold Mining ADR (NYSE: HMY) which has expanded its exploration activity in Guinea extensively.

Finally, Kinross Gold (NYSE: KGC) has expanded its operations greatly in West African nations.

Investors should keep in mind that in addition to the risk that gold prices will fall, there is still a large political risk in many of these countries. So investors may want to scale in to their positions.

Apple and Google Score in the Holiday Season

The battle in the smartphone market during the Christmas season seems to have come down to a two-horse race between the iPhone from Apple (Nasdaq: AAPL) and smartphones with the Android operating system developed by Google (Nasdaq: GOOG).

In the third quarter of 2011, the number of Android-powered smartphones knocked the iPhone into second place overall with Korea's Samsung overtaking Apple to become the world's largest seller of smartphones.

However, analysts have expected Apple to bounce back smartly in the fourth quarter following the launch of its iPhone 4S in October. And the analysts may be right. In the U.S., the iPhone 4S has been the best selling phone in the run-up to the Christmas holiday.

The success of the iPhone and Samsung's line of Android-powered smartphones seems to have pushed aside the competitors this holiday season. Competitors such as HTC and Research in Motion (Nasdaq: RIMM) have warned of very weak holiday sales.

An analyst an Bernstein, Pierre Ferragu, said this about Apple and Android-based smartphones: “We now have a strong conviction that the two ecosystems won't leave much room for any alternatives.”

It remains to be seen though whether this will continue to be true in the months ahead.

The New Safe Haven Investment - Diamonds

Not only are diamonds a girl's best friend, but they may also be a friend to investors looking for a safe haven from market storms.

The supply and demand scenario for diamonds offers a scenario which points to higher prices.

On the demand side, wealthy Chinese and Indian consumers as well as those from the Middle East have lit a fuse under the diamond market.

Last year, Gareth Penny, the CEO of the leading diamond company DeBeers, spoke about Chinese demand: “If you look back 20 years, there was no diamond acquisition culture in China. But today in Beijing, Shanghai, and Guangzhou, there is an obvious launch pad. 40% of brides in those cities are getting diamond engagement rings. It was zero 15 years ago."

Now consider the supply side of the equation. There have been no new discoveries of large diamond mines for more than a decade. And even if one was found, developing a new mine takes 10 to 12 years.

Diamond prices have already jumped in the past year fueled by Asian demand. The value of top quality polished diamonds of 5 carats have risen to roughly $150,000 a carat, up from the $100,000-$120,000 range of a year ago.

No wonder then that DeBeers, which is owned by Anglo American, said its earned more from its diamonds in the first six months of 2011 than in any previous six month period.

Another factor to consider is that diamonds are still cheap, with prices still well below their inflation-adjusted 1980s peak.

So if one believes in the bullish scenario for diamonds, how can an investor get in on it. Besides buying a diamond for someone special, there is one pure play in the stock market on diamonds.

It is a company called Harry Winston Diamond (NYSE: HWD). The company owns a 40% interest in the Diavik Diamond Mine in Canada. It is also a luxury retailer known as a premier diamond jeweler with many locations in emerging markets.