Billionaire investors back a gold price rally in 2016

Part of the upside potential is based on the fact that gold has gotten much smarter. Commodities downturns encourage innovation. Gold is surging in part because its miners have become much more efficient, according to Bloomberg. It's not just about more attractive exchange rates for miners outside of the U.S.

The amount companies are spending to produce an ounce of gold today has fallen by around 34 percent since 2012, the news agency says. This is what long-term billionaire investors want to see, and it's why they are comfortable putting big cash into gold right now.

In response to particularly weak U.S. job growth rate in May, the price of gold jumped by nearly 3 percent last week, and it's still maintaining this bullish attitude.

Bullion may have suffered a price dip earlier in May, but the per-ounce rate remains almost 15 percent stronger than the beginning of the year.

The first few days of June have also seen gold prices spike upward, signaling a swift recovery from mellow May and a continuation of 2016's legacy as a golden year for the namesake commodity.

While all major gold stocks have had an amazing year so far, the top three, according to ProfitConfidential, are Barrick Gold, up more than 160 percent year-to-date, Goldcorp, up more than 40 percent, and Newmont Mining, up 75 percent.

Fundamentally, Gold is Now a Great Junior Game

The first quarter of this year has made it brilliantly clear that junior miners are a good bet. Their fundamentals are stronger than ever—and this is, after all, where all the initial exploration work is done.

It's not just the major miners who are getting smarter and more efficient. The juniors have been producing at all-in sustaining costs coming in hundreds of dollars lower than the per ounce price. Operating margins have never looked better.

But the best part for the savvy investor is that everyone catches on first to the major miners, while the juniors stay off the radar, which means that while gold prices surge, there is a short window of opportunity when the juniors are selling cheap. Even so, many of them have seen their stocks double since early this year.

Sandspring Resources, for one, is focused on advancing its 100 percent owned, 6.9-million-ounce Toroparu Gold Project in Guyana. It also continues to explore its over 98,000-hectare highly prospective concession.

Toroparu is the fourth-largest gold deposit in South America held by a junior instead of a major, offering great upside with a rising gold price and as a potential acquisition target.

Other juniors could also benefit from the recovery of gold while their shares remain cheap enough to lure in new investors, including GoGold Resources, with its flagship project in Mexico; Pilot Gold, in Turkey, Utah and Nevada; or Lydian International focused on Armenia and Georgia.

What happens with juniors is that they do all the heavy lifting, and then the majors swoop in with the big money once a new discovery is ready to be mined.

While the major miners are already enjoying a stunning revival and the billionaire investors are already raking in the revenues, the juniors are the next spot on this high-speed commodities train, because this is where the real reward will be—and it just got a lot less risky.