Gold prices have reached multi-year highs and, since the Fed is expected to cut interest rates this year, Gold’s bull market could continue for some time.
Lower interest rates put more cash into circulation, and more cash means less inherent value per dollar. This is an excellent economic environment for gold, which generally tends to rise as the value of the dollar goes down.
Gold is considered a safe haven investment. It’s been around for thousands of years and is still held in large amounts by central banks across the globe. In this brief article, we will explore different ways to invest in gold and also some of the best gold stocks.
Gold is viewed as a hedge against inflation and it has a negative correlation to the stock market, so holding it is a great way to diversify your portfolio.
How To Get Exposure To Gold
Now, there are many ways you can gain exposure to the gold market. The first is buying physical bullion. However, most investors don’t really want to bother with trying to store their gold and keep it safe. Also, it’s not easy to buy and trade, like stocks.
You can also trade gold futures through your broker, but margins are relatively high. It’s not suitable for smaller trading accounts.
The easiest way to buy gold is through the stock market. The SPDR Gold Shares ETF (GLD) tracks the spot price of gold bullion. It’s the most popular investment vehicle for most traders.
But if you’re looking for greater returns, your best bet is in individual gold-related stocks.
Now, there are different sub-categories when it comes to gold stocks, including miners, junior miners, and developmental-stage gold miners and there are even a few gold penny stocks just to name a few.
Finding and extracting gold is not cheap, so you need to do your homework when screening for gold stocks. It takes time and money, so you want to look for firms that are well capitalized with little to no debt. Also, avoid companies that do the majority of their business in politically unstable countries.
The Best Gold Stocks In The Game Today
Newmont Mining Corporation (NEM):
With a market cap of nearly $20B, this US-based company acquires, develops, explores for, and produces gold. They are the only gold producer listed on the S&P 500 index.
Newmont is running projects on four continents and five countries. In December of 2017, CEO Gary Goldberg was inducted into the American Mining Hall of Fame. Newmont also pays its investors a dividend, so it’s an attractive play for income investors.
Newmont recently agreed to a merger deal with Barrick Gold. Under the terms of the deal, Barrick would own 61.5% of Newmont. The deal is still pending regulatory approval.
Barrick Gold Corporation (ABX):
Headquartered in Toronto, Canada, Barrick is one of the largest gold miners in the world. The company has projects in the United States, Canada, Australia, Argentina, Chile, Peru, the Dominican Republic, Papua New Guinea, Tanzania, Zambia, and Saudi Arabia. That said, more than 75% of the firms gold production comes from the Americas. At the end of 2016, Barrick had proven and probable gold reserves of 85.9M ounces.
Barrick offers a dividend to investors and has a CEO who puts his money where his mouth is. CEO John L. Thornton owns more than 2M shares of the company in which 65% was purchased using his own personal funds.
Barrick recently entered into an agreement to merge with Newmont Mining Corp. The merger is still pending approval. If approved, Barrick will hold 61.5% of Newmont’s outstanding shares.
Franco-Nevada Corporation (FNV):
Operates as a gold-focused royalty and stream company in the United States, Canada, Mexico, Peru, Chile, and Africa. As of March 21, 2017, it had a portfolio of 259 mineral assets and 80 oil and gas assets.
What’s most impressive is that it has no debt and uses its free cash flow to expand its portfolio and pay dividends. Shares of the stock have been on an impressive run over the last couple of years. This is a testament to their execution and being a truly cash flow business.
Gold Miner Stocks Are Different From Buying Gold
When investing in gold stocks remember you are investing in a company. These companies usually move along the lines of gold’s spot price, but that’s not a certainty. However, with greater risk comes greater potential for reward. You might able to get a better return buying gold miner stocks.
Make sure to do your homework and understand that gold stocks will not always follow the price of gold.