Gold stocks are exchange-traded investments that focus on gold. The industry consists of the following types of entities:
- Mining company: These companies explore for gold resources, develop mines, and sell gold and other metals.
- Emphasis on gold Exchange Traded Fund (ETF) (ETF): These funds own physical gold or shares in multiple gold mining companies.
- Gold streaming and royalty companies: These companies pay upfront fees to mining companies in exchange for:
- A percentage of the mine's revenue (e.g. mining royalties).
- The right to purchase future production of a particular metal at a particular mine at a fixed price (such as a mining stream).
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Gold is a safe metal. Investors buy gold to hedge against risks such as rising inflation, geopolitical events, and financial crises. These factors can cause the price of gold to fluctuate.
The same was true in 2022 and early 2023. Inflation and geopolitical concerns have pushed gold prices higher over the past year, to more than $2,000 an ounce as of early 2023. But prices have become more volatile as investors weigh rising interest rates, inflation and other factors against the possibility of a recession.
There are many benefits to buying gold stocks rather than the physical metal to reap the potential returns of investing in gold. Gold companies can generate higher total returns than investing in physical gold. This is because these companies can increase production and reduce costs. These factors help gold mining companies increase profits. Increased profits can cause stock prices to rise faster than the price of gold.
However, not all gold stocks outperform gold itself. Investors should carefully choose the best gold stocks to buy.
top gold stocks
top gold mining stocks
Dozens of companies are focused on mining gold, giving investors many options. Here are the top gold stocks to buy in 2023.
|
gold stock |
explanation |
|---|---|
|
Barrick Gold (NYSE:GOLD) |
One of the world's largest gold mining companies. |
|
Franco-Nevada (NYSE:FNV) |
A leading royalty and streaming company with a focus on gold. |
|
VanEck Vectors Gold Miners ETF (NYSEMKT:GDX) |
A gold ETF that holds shares in multiple major gold mining stocks. |
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1. Barrick Gold Corporation
1. Barrick Gold Corporation
Barrick Gold strives to be the world's most valuable gold mining company. The Canada-based company focuses on operating Tier 1 mining assets, which Barrick defines as assets that:
- Ability to produce over 500,000 ounces of gold annually.
- It has at least 10 years of useful life left.
- Low-cost operations defined by total cost per ounce.
By focusing on operating large mines with significant remaining resources, Barrick is able to produce gold at a relatively steady pace for many years. The company expects to produce an average of approximately 6.5 million ounces of gold equivalent (including copper production) per year through 2032.
Barrick complements its leading gold mining portfolio with a strong balance sheet. The company has focused over the past few years on paying down debt through free cash flow and the sale of non-core assets. As a result, the company has a net cash balance as of early 2023, giving it the financial flexibility and strength to repurchase stock and pay an attractive dividend. The company pays a base dividend and a performance dividend, the latter based on the amount of cash on the balance sheet at the end of each quarter.
2. Franco-Nevada Corporation
2. Franco-Nevada Corporation
Franco-Nevada is a streaming and royalty company based in Canada. The company has a diversified portfolio with contracts related to gold, silver, platinum group metals (PGMs), iron ore, and oil and gas. In 2022, 55% of revenue came from gold.
The main benefit of Franco-Nevada's focus on royalties and streaming is reduced risk. They do not face the capital and operating cost overruns that have historically plagued mining companies. At the same time, the Franco-Nevada agreement positions mining partners to benefit from completing exploration and expansion projects.
Franco-Nevada's streaming and royalty agreements allow it to generate significant cash by selling the physical goods it receives. That cash flow allows us to invest in new deals and pay dividends.
Franco-Nevada has increased its dividend every year since its initial public offering (IPO) in 2008, reaching a milestone of 16 consecutive years in 2023. The company also boasts a debt-free balance sheet, a rarity in the mining industry. More financial flexibility to invest in new royalties and streaming deals.
Franco-Nevada's stock has historically outperformed the price of gold and other gold mining stocks because it can profit from gold mining without being exposed to the risks of mine development. All these factors make investing in gold stocks ideal.
And for those interested in ESG factors, the company has stated in its 2022 Asset Handbook that the group as a whole will achieve 40% diverse representation among its board and senior management by 2025. He says he has a goal. , “Invest for the world you want to see.”
3. VanEck Vectors Gold Miners ETF
3. VanEck Vectors Gold Miners ETF
The VanEck Vectors Gold Miners ETF owns stocks in major gold mining companies. It is one of the largest gold ETFs, with approximately $14.8 billion in assets as of early 2023, and the ETF held shares in 48 gold mining companies. VanEck's top five holdings are:
- Newmont Co., Ltd. (Nemu 1.67%)
- barrick gold corporation (Money 2.65%)
- franco nevada corporation (FNV 1.59%)
- Agnico Eagle Mines (AEM 3.11%)
- wheaton precious metals (WPM 1.86%)
Five gold stocks accounted for nearly 39% of the ETF's assets, with Newmont accounting for more than 10%. Market caps for gold stocks range from Newmont's $41 billion to Wheaton Precious Metals' $22 billion.
These top holdings, excluding Wheaton Corporation and Franco-Nevada, are the world's largest gold mining companies. Agnico moved to the top of the list in 2022 after completing a merger with fellow gold miner Kirkland Lake Gold. In 2023, it acquired Yamana Gold's Canadian assets and further expanded its scale. pan american silverMr. Miss(PAA 1.44%) acquisition of the company. Franco-Nevada and Wheaton are leading gold streaming and royalty companies.
Gold ETFs make it easy for investors to own a large, diverse group of high-quality gold companies. The ETF also has a reasonable expense ratio of 0.51%, making it a relatively cost-effective way to invest in many gold stocks.
Related investment topics
Choose the best gold stocks
Many factors affect the price of gold, including monetary policy and inflation. For many years, gold has been the top choice for investors looking to hedge against these risks. However, cryptocurrencies could lose the luster of gold and other precious metals, and investors should monitor this new risk.
That aside, one of the best ways to invest in the gold market is through gold mining companies. They benefit not only from higher gold prices, but also from their ability to increase production and reduce costs. As a result, top gold mining companies often outperform the price of gold. Top gold miners have low cost structures, manageable debt levels, and limited exposure to high-risk mining projects.
On the other hand, gold streaming companies generally offer the best risk-reward potential of any gold-focused investment option. They are well-positioned to benefit from rising gold prices without taking on the risks associated with mining physical gold.
Finally, investors who don't want to identify the best gold mining stocks individually can consider buying shares in a gold ETF. Gold ETFs are a more convenient and cost-effective option to invest in gold stocks. Gold ETFs offer broad exposure to this sector by owning shares in gold mining companies or physical gold. Gold ETFs are widely available, so you don't need to be a stock pick guru to participate in the gold industry's rally.
FAQ
Frequently asked questions about investing in gold stocks
1) Are gold stocks suitable for long-term investment?
Gold stocks are suitable for long-term investments. For example, Franco-Nevada has outperformed gold prices and the overall stock market over time. However, investors should choose their investments in gold stocks wisely, as not all gold stocks offer attractive investment returns due to the risks involved in mining.
2) Should I carry cash or gold?
The decision to hold cash or gold is a personal preference based on beliefs about inflation, the economy, and the money supply. Over the past decade, gold has outperformed cash. According to data from Bankrate.com, gold has an average annual return of 0.8%. Meanwhile, the average annual cash return, as measured by one-year CDs, was 0.4%. However, despite being known as an inflation hedge, it has not performed as well as expected in recent years.
3) Why not invest in gold?
While there are many positive reasons to invest in gold, there are also some disadvantages. These include the possibility that the price of gold will fall; It's not necessarily a good hedge against inflation or macroeconomic headwinds. And over the long term, stocks may underperform. On the other hand, owning physical gold comes with risks and costs (such as insurance and theft). Investing in gold is not suitable for everyone. Before investing in gold, you should strongly believe that the price of gold will rise.
Matthew DiLallo has no position in any stocks mentioned. The Motley Fool has no position in any stocks mentioned. The Motley Fool has a disclosure policy.
