Investing In Gold Stocks: What You Need To Know About

By Altay Gursel | February 23, 2021
Home / Retirement / Investing In Gold Stocks: What You Need To Know About

All You Need To Know About Gold Stocks

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Gold is regarded as one of the most valuable resources ever known to humanity throughout history. Gold’s value stems from the fact that it is scarce and it does not corrode.

Scarcity automatically increases the value of any commodity, added to the fact that the metal maintains its shine even after decades, makes it a really high in demand product and a viable investment commodity.

Gold stocks are company stocks and funds that are focused on gold. These companies are mainly companies that mine and sell gold but can also involve gold streaming and royalty companies that act as middlemen in the sector.

Gold streaming and royalty companies pay some fees up-front to gold mining companies in exchange for a percentage of the revenues generated from sales of gold. These streaming companies are not involved in the mining process or location of the gold.

Their sole aim is to fund these gold companies to carry out their mining and, in exchange, earn the rights to purchase gold at a reduced price.

Individual investors can also buy shares in gold-focused exchange-traded funds (ETF), which hold physical gold or shares of mining companies.

Gold investors always have a hard time choosing which company to trade or invest with. I have put together a list of the top 10 gold stocks with the fastest growth rates and the best value you can choose from.

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How to Choose Gold Stocks to Invest In?

The value of gold fluctuates from time to time because it is a commodity that trades on a public exchange and is determined by the rules of supply and demand. Recently, more investors have been attracted to this investment option because of its potentials.

The reasons people buy or sell gold varies from person to person. Some do it out of sheer curiosity, as a means to acquire physical gold, or even as a hedge for commercial purposes. The majority of investors invest in gold to profit from its “goldmine” potentials and market price movements.

Before you make that choice, you will want to consider a lot of factors that could pose a threat or hinder you from making a good investment option. Some of them are;

  • Find out if the markets are in “risk-on” or “risk-off” mode. Endeavor to survey the market before investing. Know when the risks are high and low by consulting with professionals and also studying the market activities.
  • Compare the performance of the US Dollar as well as the gold price. Gold is generally priced in US dollars, so it is expected that gold price in dollars will be high in correlation with the dollar index.
  • Consider a mix of fundamental, sentimental, and technical analysis. It is difficult to measure fluctuations with the human perception because of the unique nature of gold when compared to stock, shares, or valuable commodities. So it is important to use analysis such as high inflation, economic crisis, etc., to measure.
  • Central bank actions. Always keep an eye on the activities of the central bank concerning buying and selling. This can indicate when it’s right for you to invest.
  • Look at the industrial supply and demand for gold and jewelry. The volume per data shows that jewelry production is in high demand globally. Another 40% represents investment accounts. Always pay attention to the price charts, and you’ll see that when demand is up, and supply is down the price rises. When the supply increases and demand drops, live price rates will also fall.
  • Blogs and Newsletters. You can get information and expert ideas from blogs, newspapers, discussion forums, etc.

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Some of the top gold mining companies with stocks to choose from include:

1: Barrick Gold (NYSE: GOLD)

Barrick Gold is one of the world’s largest gold mining companies involved in the exploration, production, and sale of gold properties. This corporation was founded in 1983 and has its headquarters in Toronto, Canada.

This company has 16 operating sites in 13 countries, making it a truly global and reputable industry in the sector. Its reputability and strong integration into supply chains make it one of the very best gold stocks worth your investment.

Barrick Gold focuses on operating large mines that can have at least 10 years of active productivity span, produce over 500,000 ounces per year, and can deliver total cash costs per ounce in the lower half of the industry cost curve.

These targets are sure to keep Barrick Gold stable and rewarding for its investors for many years to come.

Barrick maintains a debt-free balance sheet, complementing its standard pedigree as a top company, which has given it better financial flexibility, allowing it to pay a growing dividend.

2: Franco-Nevada (NYSE: FNV)

Franco-Nevada is a gold streaming and royalty company that has agreements covering gold, silver, platinum metals group, oil and gas, and other commodity and natural resources. The company, which generates the bulk of its revenue from gold, has become one of the largest gold stock companies in the world, maintaining stability over the past few years.

Its contracts provide it with access to cash and finances to invest in new deals and pay a dividend, which it has grown each year. Franco-Nevada has a debt-free balance sheet, and its stocks have always outperformed both gold and the mining sector, which makes it ideal for investors.

The company focuses on royalties and streaming without any exposure to capital and operating cost overruns. However, it offers the same upside profile as a miner, given its leverage to the value of gold, exploration, expansion upside, and dividend yield.

With a P/E ratio of 120, it is one of the more expensive companies in the sector, but it is definitely worth the price, judging by its stability alone.

3: Eldorado Gold Corp

Eldorado Gold Corp is a Canada-based gold mining company with operations all over the world, including Turkey, Greece, Brazil, Romania, and China.

The company has a $2 billion valuation and a share price of about $10. With a 35% increase in gold production for the third quarter of 2020 and strong revenue of over $600 million, the company is well on the right track and promises even better in the coming years.

If you are interested in a gold streaming company that trades below net asset value and projected production of at least 450,000 ounces of gold per year for the next five years, Eldorado Gold Corp may be your best bet.

4: Newmont Corporation (NYSE: NEM)

Newmont Corporation is widely known as the largest gold producer and the third-largest investment of Jim Simmons, accounting for 0.51% of the overall portfolio.

The American company offers one of the most stable stocks in the commodities sector, with an affordable P/E of 12 and 1.6% dividend, making it an attractive buy.

The company made an entrance in the sector in the third quarter of 2014 and has since grown to be a leading company in the sector.

The growth in prices of gold also helped Newmont generate record financial numbers, growing its share price and increasing dividend yield. The quarterly dividend has currently been increased by 60% to $0.40 per share.

In early 2019, Newmont acquired Canadian company Goldcorp in a $10 billion contract. This acquisition paved the way for Joint Ventures.

With global exposure and strong supply chain integration, a robust free cash flow, and a sustainable long-term venture, there are not many companies who can claim to be a safer gold investment platform.

5: Kirkland Lake Gold (NYSE: KL)

Kirkland Lake Gold, formerly known as Newmarket Gold, is a Canadian gold producer with major mines in Canada and Australia.

It is one of the biggest and most profitable gold mining companies in the world, producing about $1 billion in operating cash flow, $555 million in net earnings, and $500 million in free cash flow to date.

It is a member of Jim Simmons’ portfolio since the third quarter of 2017. Arguably one of the best gold stocks you can buy, this company is valued at about $206 million and has cash returns to investors as a key component of their business strategy.

Kirkland Lake Gold has been involved in the massive repurchase of shares, canceling out 14 million of its shares year-to-date and boosting its earnings per share and cash flow per share metrics.

The company has one of the strongest balance sheets in the industry, with $1 billion in cash and zero debt at the end of last year.

This company tends to be a good choice if you are looking to invest. They have a track record of exploration success and hence can stay stable for a long period of time to come.

6: AngloGold Ashanti (ASX: AGG, NYSE: AU)

AngloGold Ashanti is a South African global mining company that was established in 2004. This company carries out 21 operations in 4 continents and about 9 countries. It is listed in the New York, Johannesburg, Accra, London, and Australian Stock Exchange.

It is a merger of AngloGold and Ashanti Goldfields corporations that have gone on to become the third-largest producer of gold as of 2014, behind only Barrick Gold and Newmont mining.

The company has a Responsible Investment Index Series, Responsible Mining Index, and the Dow Jones Sustainability Indices. This makes for a highly sustainable option for investors.

An interesting fact about AngloGold Ashanti was that operations were suspended in 2014 due to maintenance works, but the company took the decision in 2018 to redevelop and restart commercial gold production. Since then, remarkable transformations have been quite evident.

7: Polyus (OTC Pink: OPYGY, MCX: PLZL)

Polyus is a Russian gold mining company and rightly among the top 10 mining companies in the world. It is the largest gold producer in Russia, with over 61 million ounces of gold reserves.

It operates mainly in Eastern Siberia and the Far East parts of Russia. The company is listed in both Moscow and London Stock Exchange and has a projected 2.8 million ounces of gold.

8: Gold Fields (NYSE: GFI)

Gold Fields is a globally diversified gold producer with 8 mines in Australia, Ghana, Peru, and South Africa. It has its headquarters in Johannesburg and is listed in the New York Stock Exchange and Johannesburg Stock Exchange.

Created in 1998 after the merger between Gold Fields of South Africa Limited and Gencor Limited, it has grown to become one of the largest mining companies in South Africa and the world at large.

In 2009, the company produced 68.4 tonnes of gold, a remarkable increase from the 63.3 tonnes in 2018. The company is growing at a good pace and certainly a good option for you to invest.

9: Agnico Eagle Mines (NYSE: AEM, TSX:AEM)

Agnico Eagle Mines is a Canadian gold mining company with operations in 8 gold mines in Finland, Canada, and Mexico, with explorations and development activities extending to the US and Sweden.

This company has a 50% ownership of the Canadian Malartic mine in Quebec and has poised itself to reach an annual production level of at least 2 million ounces per year by 2021.

The company and its shareholders have full exposure to gold prices because of its no forward gold sales policy and thus have been paying cash dividends to clients since 1983.

Gold production for the New Year is expected to be about 1.73 million ounces, providing a good foundation for further growth and stability.

10: KORE Mining

KORE Mining is a Canada-based company that is engaged in the acquisition, exploration, and development of gold projects. The company owns two gold projects in the US, which seems to be building up to become gold mines in the near future.

In particular, the Imperial project, located at Imperial County, South Eastern California, just 9 miles from Equinox Gold’s (EQX) producing Mesquite mine has every attribute of a simple open pit, heap leach project, with strong economics.

Imperial will cost $143 million to build with an estimated annual production of 146,000/oz gold at $852/oz all-in sustaining costs, leaving healthy margins at spot gold prices. The project carries a net present value of $450 million, using a conservative gold price of $1,600/oz.

KORE also owns the Long Valley project, another open-pit, heap leachable gold mine project in Mono County, East Central California.

The upfront Capex of $161 million is a reasonable price tag, as Long Valley profiles as a 102,000/oz per year operation at a competitive AISC of $773/oz, based on its current resource. The net present value is $273 million, using $1,600/oz gold and a 5% discount rate.

The two projects have considerable exploration upsides, especially at Imperial, where management feels the 19 kilometers of target strike hosts the potential for multiple multi-million-ounce gold discoveries.

This is a good investment option for investors because KORE is on the right path, is obviously stable, and covering more grounds than the others to remain sustainable in the sector. The project’s value will gain a big boost if the potential to extend the mine life for a few more years is actualized. 

Conclusion

Gold has evolved to become a very important part of a diversified investment portfolio for investors. This is because its price increases in response to events such as demand and supply that cause the value of paper investments like stocks and bonds to decline and become less attractive.

Although the price of gold can be volatile in the short term, it has always maintained its value over the long term. Through the years, gold has served as a hedge against inflation and the eradication of major currencies as we know it, and thus, it is an investment option well worth considering.

Purchasing physical gold in all of its forms bullion, coins, etc. – is the most direct way to purchase and invest in gold. But due to the high commissions attached to it, storage, insurance, etc., most investors have shown more interest in buying and trading liquid stocks.

The demand for gold has sprouted so much among investors, as many people have started seeing it as an investment opportunity they can put their money on.

Investors, however, do have a hard time settling down to make researches or choices of which of the gold mining or gold streaming companies to invest with.

With a few Canadian companies making for most of the spots on the list, this list of Gold stocks should avail you options before carefully choosing the one to invest in.