Nothing symbolizes wealth like gold. It is the world’s most precious metal and is synonymous with riches and success. “That company is a gold mine,” is a common expression to describe a successful business. People buy bars of gold as a hedge against market volatility and currency fluctuations. But is buying gold stocks really a good investment?
As with most investments, the answer is a resounding “maybe.” Gold stocks — more specifically, stock in companies that mine gold — fluctuate, just like any other investment. So if you’re considering adding gold stocks to your portfolio, it’s important to do your homework.
What is the best gold stock? Here are some to consider.
Agnico Eagle Mines Ltd.
Agnico Eagle Mines Ltd. (AEM) is a Canadian company that mines gold and other precious metals. It has operations in Canada, Australia, Finland and Mexico, and is developing mines in those countries, as well as in the United States and Colombia. Agnico Eagle Mines has a significant history and track record — it was founded in 1957 and has declared a cash dividend each year since 1983.
While the stock is down about 20% since the beginning of the year, from $51.75 to $41.44 on September 21, 2022, most analysts like it. Of the 17 analysts who rated it in September, two gave it a “strong buy,” six said, “buy,” and five recommended holding it. One said it was underperforming and one recommended selling.
The 12-month average price target is $87.34, which represents an increase of over 100% from its current price. Its forward dividend is $1.60 with a yield of 3.89%.
Torex Gold Resources
Torex Gold Resources (TXG.TO) owns, explores, develops and operates the Morelos Property in the Guerrero Gold Belt southwest of Mexico City. The mine has been producing for Torex since 2016. Earlier in September, the company reported positive assay results from the Sub-Sill and El Limón Deep zones of the El Limón Guajes mine.
The company’s stock has fallen somewhat this year and is trading at $9.40 as of September 21, 2022, near its 52-week low of $8.54. Its average 12-month price target is $21.02, however, and of the 10 analysts that follow the stock, six recommend it as a buy, and two call it a strong buy. The other two recommend holding the position.
Sandstorm Gold Royalties Ltd.
Sandstorm Gold Royalties Ltd. (SAND) does not operate gold mines but owns royalties on mines operated by others. The company recently completed the acquisition of Nomad Royalty Company Ltd. for stock, and the acquisition of nine royalties and one stream from BaseCore Metals LP in a cash and stock transaction. These two acquisitions, totaling $1.1 billion, are expected to increase Sandstorm’s size and scale significantly.
As of Sept. 21, 2022, the stock closed at $6.18, compared to the $6.04 it closed at on the first trading day of the year. Sandstorm Gold Royalties is followed by just five analysts, three of whom recommend buying it and two of whom recommend holding it. The average price target is $9.70.
Yamana Gold Inc.
Canadian gold mining firm Yamana Gold Inc. (AUY) is currently a takeover target of Gold Fields, Ltd. (NYQ), a South African company with nine operating mines in five countries. The takeover offer is a stock offer valued at $7 billion, valuing Yamana stock at $4.41 per share.
Virtually flat year-to-date, Yamana is trading above its 52-week low of $3.70. On September 21, it closed at $4.28. Its forward dividend is $0.12 with a yield of 2.80%, and its average 12-month price target is $6.59. Analysts seem to think it may be overvalued at the moment, with 7 of 14 analysts recommending holding the stock and two rating it an underperformer. Four recommend buying and just one considers it a strong buy.
Newmont Corp. (NEM) mines gold, silver and copper, as well as other metals and minerals. The company, which was founded in 1916, has operations in North America, South America, Australia and Africa.
Newmont’s stock is down about 30% year to date, closing at $42.40 on Sept. 21. Its forward dividend is $2.20, with a yield of 5.19%. Analyst sentiment is mostly positive, with two of 18 analysts rating it a strong buy and nine rating it a buy. Seven recommend holding it. The average 12-month price target is $116.75, which is a significant gain in a year.
Barrick Gold Corp.
Barrick Gold Corp. (GOLD) has gold mining operations in the United States, Tanzania, Canada, Mali, the Democratic Republic of Congo, Papua New Guinea, the Dominican Republic, Côte D’Ivoire and Argentina. It also has copper mining operations in Saudi Arabia, Chile and Zambia.
Barrick Gold began the year trading at $18.54 and, as of Sept. 21, is down to $15.18. It does pay a dividend, however, and its forward dividend is $0.80, with a yield of 5.27%. Just four analysts made recommendations on Barrick Gold stock in September. Two recommended it as a strong buy, one as a buy and one recommended holding the stock. The 12-month average price target is $28.41.
If you want to add gold to your portfolio but don’t want to commit to a single stock, consider a gold exchange-traded fund. These funds hold stocks that are intended to mirror the performance of a certain sector — in this case, gold stocks — in the market. There are also ETFs that invest in physical gold, allowing investors to buy gold bullion without having to keep the physical asset.
Here are some gold ETFs to consider.
VanEck Gold Miners ETF
The VanEck Gold Miners ETF (GDX) tracks an index of global gold-mining firms by market cap weight. It includes firms that mine other metals as well as gold and includes firms that may hedge their gold exposure with derivatives. It has 55 holdings, including Newmont Corp., Barrick Gold Corp. Wheaton Precious Metals Corp., Agnico Eagle Mines Ltd., Kirkland Lake Gold Ltd. and more. It has a dividend yield of 2.24%.
SPDR Gold Minishares Trust
SPDR Gold Minishares Trust (GLDM) is backed by a trust that holds physical gold bullion and, at times, cash. By purchasing shares of the trust, investors can own gold in virtually any quantity and enjoy the liquidity offered by an ETF. With an expense ratio of 0.10%, GLDM is a cost-effective way to own gold.
iShares Gold Trust
iShares Gold Trust (IAU) is also backed by a trust that owns gold bullion. It mirrors the price of gold and is a convenient and liquid way to own gold. The trust’s expense ratio is 0.25%.
Is It Better To Buy Gold or Gold Stocks?
Ultimately, whether physical gold or gold stocks are a better investment depends on several factors, including the stock market, your ability to store gold and your investing goals.
Gold prices tend not to change much in response to shifting in the stock market as a whole, so it is generally a more steady investment. However, that also means it won’t increase in price as much — or at all — when the stock market is performing well.
Physical gold also must be stored somewhere, which means you need to consider space and security.
Gold bullion makes for a solid backup and safety net, while gold stocks may or may not result in larger returns.
Gold can be a good addition to your portfolio. Since it is often used as a hedge against inflation, it has been getting quite a bit of attention recently. As with any investment, do your homework and make sure you remain diversified and that your assets are allocated according to your objectives.
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Information is accurate as of Sept. 21, 2022, and is subject to change.
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