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Gold has been considered a haven in times of economic uncertainties and market volatility, and it has remained one of the top precious metals to have ruled the market. Many investors have been exposed to gold by purchasing stocks of companies engaged in mining and exploration.
Many of these companies have become huge in the industry and are considered among the world's top 10 gold mining companies. Gold stocks underperformed the market last year for several reasons, but the stocks have solid potential to outperform the market in the coming years. If you are not keen on buying and holding physical gold, you can invest in gold stocks and exchange-traded funds (ETFs).
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What are Gold Stocks?
As the name suggests, gold stocks are publicly traded instruments focusing on gold. It is a vast industry and consists of different types of companies, including:
- Mining companies: The companies that mine and then sell gold.
- Gold streaming and royalty: The companies pay the mining companies for a part of the mine’s revenue and the right to buy the future production of gold at a certain mine for a certain price.
- Gold-focused exchange-traded funds: The funds hold physical gold or shares of gold mining companies.
There are many advantages of buying gold stocks over holding physical gold. You can enjoy higher returns on the investment and do away with the worry of holding the metal in a secure place. That said, you can also enjoy capital appreciation in the long term. Companies can expand production while reducing costs, allowing them to outperform the price of gold. But keep in mind that all gold stocks will not outperform gold. Because of this, you need to be very careful when choosing the best gold stocks to add to your portfolio.
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Choosing the best gold stocks
Several factors affect the price of gold and for many years it has been the top choice for investors who seek to hedge against the risks of inflation and monetary policies. The surge and popularity of crypto-like bitcoin could lead to gold losing its luster, a huge risk investors need to consider.
However, the best way to invest in the gold market is not by purchasing physical gold bars but through gold mining companies. This is because they benefit from the rise in gold prices and the ability to increase production while reducing costs. Some of the top gold mining companies have outperformed the stock market in terms of the price of gold.
The miners have low-cost structures, minimal debt, and limited exposure to risky projects, while the gold streaming companies offer the best risk-reward potential among all the investment options. Hence, they are well-positioned to benefit from the high gold prices without taking risks associated with mining physical gold. Investors who are not keen on identifying and investing in the best gold mining stocks can consider buying shares through gold exchange-traded funds. It is a cost-effective and convenient option for investing in gold stocks.
The ETF will also offer more exposure to the sector, and you will not need a financial advisor to help you pick the right stocks to take advantage of the industry’s upside.
Overview of the best gold stocks
Stock | Best For |
Barrick Gold Corporation | Solid dividend yield |
Franco-Nevada Corporation | Growth potential |
Newmont Corporation | Market Outperformer |
Wheaton Precious Metals | Low-risk, consistent growth |
Kinross Gold | Dividend income |
VanEck Vectors Gold Miners ETF | Best gold ETF |
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Best gold stocks
Several companies focus on mining gold, which might give you many options, but only a few shine out as the best gold stocks to add to your portfolio.
Barrick Gold Corporation
One of the largest gold mining companies in the world, Barrick Gold strives to be the most valuable company. It focuses on running the Tier 1 mining assets and can produce more than 500,000 ounces of gold annually. The Canada-based company has 10 years of productive life remaining and is known for its cost-efficient operations.
Barrick Gold Corp plans to produce 5 million ounces annually through 2030. It also forecasts that sustaining costs will be reduced in the future. If it manages to reduce costs, profits will continue to grow even if gold prices decline. The company has a solid gold mining portfolio and an impressive balance sheet. For many years, Barrick Gold Corporation focused on debt repayment through free cash flow and selling its non-core assets.
This helped the company to reduce interest costs and increase financial flexibility. The company has paid a growing dividend and has a 34-year dividend history with a dividend yield of 2.45%.
Franco-Nevada Corporation
Another Canadian streaming and royalty company, Franco-Nevada Corporation, has a well-diversified portfolio with several agreements on precious metals, including gold, silver, iron ore, platinum, and oil and gas.
More than 65% of its revenue was generated from gold. Since the company focuses on streaming and royalties, it minimizes the risk. Hence, it has no trouble with the capital or operating expense overruns that have hampered the growth of several mining companies in the past.
As its mining partners proceed with their exploration projections, Franco-Nevada gains profit due to its agreements. It has contracts with many companies allow it to generate cash by selling physical commodities it receives. This generates cash flow, facilitating investment in new deals while paying a consistent dividend since 2008.
The company's most impressive aspect is its debt-free balance sheet, which is a rarity today. The stock has outperformed the price of gold and several other mining stocks. It has a dividend yield of 1.25% and has been up 50% over the past five years.
Newmont Corporation
The Newmont Corporation stock has enjoyed an upward trend whenever global gold prices rise. The company gets about 94% of its revenue from gold, and its solid performance shows that it is making good money from the yellow metal. The stock offers a blend of value and earnings growth with a dividend yield triple that of the S&P 500.
One of the top gold producers in the world, Newmont also focuses on technology and climate. The company's financial health and growth prospects demonstrate its potential to outperform the market. Newmont Corp. is a dividend-paying company with an impressive dividend yield of 2.44%.
It has a market cap of $47.21 billion and is one of today's largest metal producers. Its silver, copper, lead, and zinc production is a byproduct of all its gold mining operations that range from Canada to the United States, South America, Africa, and Australia. By the end of 2023, the company held gold reserves of 135.9 million ounces across the 36,600 square miles of its worldwide territory. It is certainly one of the biggest names on the NYSE and NASDAQ and qualifies as one of the top stocks to buy.
Wheaton Precious Metals
Wheaton is a precious metals company that makes money by selling materials from gold, silver, cobalt, and palladium deposits. It has two dozen mining assets and is developing many more to ensure a steady supply of precious metals for the years to come. The company produced 367,000 ounces of gold in 2020, 341,000 ounces in 2021, 286,985 ounces in 2022, and 619,600 ounces in 2023.
It is a company that does not focus on being a gold producer but instead focuses on the precious metals streaming agreements, where it provides funding for the development and operation of mines. This allows the company to buy some or all of the gold produced at the mine. One of the largest metals streaming companies in the world, it has a market cap of $24 billion.
WPM is interested in 21 operating mines and 13 development-stage mines worldwide. With the investment, you also enjoy regular dividends. It has a dividend yield of 1.17%. The stock price has experienced fluctuations in the past, but the price did not vary by more than $10, and the stock is up over 130% over the past five years.
Kinross Gold
Another Canada-based gold and silver mining company, Kinross Gold Corporation, operates several active gold mines and is a mid-cap gold producer with operations spread out worldwide. The company has a healthy balance sheet, and the stock is attractively valued. It has already become a leader in the industry with mines in Brazil, the U.S., Russia, Ghana, and Mauritania.
Kinross is a revenue growth powerhouse and has recently reintroduced dividend payments. It remains an undervalued stock with massive growth potential. The current dividend yield on the stock is 1.61%. It also has strong fundamentals, with a revenue of $1081 million in the first quarter of 2024 and gold production that is consistently growing.
VanEck Vectors Gold Miners ETF
VanEck Vectors Gold Miners ETF holds the stocks of the top gold mining companies and is one of the largest gold ETFs, holding more than $858.7 million in assets as of 2024. The company holds shares in 60 gold mining companies, including Barrick Gold Corporation, Wheaton Precious Metals, and Franco Nevada Corporation. Hence, you can consider investing in the ETF if you do not want to buy an individual gold stock.
It will allow you to own a diverse group of large-scale companies and has an expense ratio of 0.53%, which is a cost-efficient way to invest in various gold stocks. This fund is heavily weighted by market cap since it holds some of the top miners, including Newmont, Franco-Nevada, and Barrick Gold. Most of its funds are focused on the top ten holdings, making it a top-heavy ETF.
One thing to remember is that gold miners are more reactive to the price of gold than gold ETFs that hold the metal. So if the value of gold rises, then it is boom time for mining companies and more stability in the long run.
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Summary of the top gold stocks
Stock | Cost (as of closing June 14, 2024) | Dividend yield | Market cap (in billions) |
Barrick Gold Corporation | $ 16.02 | 2.45% | $ 28.04 |
Franco-Nevada Corporation | CAD $159 | 1.24% | $ 30.62 |
Newmont Corporation | $ 40.94 | 2.44% | $ 47.21 |
Wheaton Precious Metals | $ 52.92 | 1.17% | $ 23.97 |
Kinross Gold | $ 7.42 | 1.62% | $ 9.12 |
VanEck Vectors Gold Miners ETF | $ 33.20 | 1.47% | - |
FAQs
Are gold stocks a safe investment?
If you have thoroughly researched the stocks you want to buy, investing in gold could be a suitable choice. Considering the historical returns can give you an idea of what to expect based on the assumptions but you must keep in mind that the past performance will not guarantee future returns. But gold has performed well even in market turbulence and it can provide a certain level of safety as compared to the other stocks.
Should I buy physical gold or gold stocks?
When choosing between buying physical gold or gold stocks, you need to consider your investment goals and horizon. Those who want to take advantage of owning physical gold will prefer this option if they can handle the security and storage issues. While others may choose to invest in gold stocks to enjoy the financial return without incurring heavy storage costs.
What are the benefits of investing in gold ETFs?
There are several benefits of investing in gold ETFs and one of the top benefits is that you will not hold physical gold. You can own the metal without worrying about its storage and security. Additionally, it offers complete transparency and you can invest in various gold mining companies instead of focusing on a single one. It is a convenient and cost-efficient way of owning gold.
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The bottom line
Investing in gold stocks is a smart choice and a great way to protect your portfolio from market volatility. As long as the companies manage gold production, they can report solid fundamentals. By investing in some of the world's top gold mining and royalty companies, you will be able to ensure high liquidity and take advantage of the stock's appreciation.
Since most of these companies pay a consistent dividend, you also have a chance to enjoy passive income. Gold is in a great position to continue the upward trend, given the current global situation and the high interest rates and its impact on gold.
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Writer
Vandita Jadeja is a financial writer and editorial assistant at Joywallet. She loves to read and write about money and brings 7 years of experience from the financial industry. She loves coffee, mountains and sunsets.
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