While the global financial markets has experienced high volatility and several crises in recent years (and weeks) since the onset of COVID-19, gold has seen a substantial increase in its popularity. With newsfeeds recently buzzing with coronavirus fears, investors went into overdrive scurrying for safe-haven assets to counter the uncertainty. This in turn has driven the gold price to a seven-year high on February 24th of this year.
Gold is globally considered as an investment that combats inflation as it mitigates risk and protects long term wealth. It has become a safe haven for the majority of savvy investors in uncertain (almost desolate economic meltdowns) as an alternative to the stock market.
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Without a shadow of a doubt, Gold is a great investment. In this article, we are going to dig deeper into the reasons for buying a gold stock, how to buy gold stocks, and in addition to that, we’ll be covering the hottest gold stocks of 2020 with in-depth details about each company in addition to helping you choose the gold stock that might be the right fit for you
Gold Stocks Today and The #1 Reason You Need to Invest
Interestingly enough, gold has many moving parts that impact its price. For example, almost 50% of the demand for gold comes from the jewelry industry according to the World Gold Council, and principally from markets like India and China, where gold has sentimental and cultural value.
Furthermore, gold is typically considered a hedge against inflation, crisis, and uncertainty in financial markets, which is why global events like trade wars, global epidemics, and central bank policies such as the interest rate, fluctuations in the Dollars value, and macroeconomic data, are specific factors that can affect gold prices. Precious metal prices can also be driven up by the same factors.
Unsurprisingly, having gold in your investment portfolio is also one of the best ways to diversify in addition to its role as a hedge. According to a Forbes report, the billionaire investor Ray Dalio and the founder of Bridgewater Associates revealed in his interview with Tony Robbins that the ideal portfolio for the average investor includes about 7.5% gold. Dalio is also an advocate of diversification and has long championed investing in gold. So, whatever your gold trading strategy is, you might want to consider gold options for your investment portfolio.
The question still arises, why should you invest your money in a gold stock?
While buying physical gold in any form whether it be a gold bar, medals or jewelry is probably the most direct way to gain exposure to gold, it also means you have to pay high-commissions while bearing additional costs and risks related to transportation, insurance, and storage of the precious metal. Taking this into account for investing in gold, you can come to the conclusion that gold stocks are usually the best option for most savvy investors.
Gold stocks (in this manner) means the stocks of companies that revolve around the gold industry such as mining gold, or financing gold production. Consequently, when buying gold stocks, you effectively purchase an ownership company's stake, and the company's performance determines your returns.
Moreover, the environment of growing gold prices is typically good news for gold mining companies, as higher selling prices boost their revenues. So far, 2020 is turning out to be a positive year for gold prices, making it an opportune time to buy gold stocks or to add to your existing position.
Gold stocks are a more convenient and cost-effective way to invest in gold if you'd prefer to choose individual gold stocks and retain the autonomy to decide which companies to invest in and in what proportion.
Gold stocks also offer the highest return potential to investors because, in theory, a company's share price should eventually reflect the company's operational and financial growth. That means that shares of a gold company could maximize the returns for invested capitals, and committed shareholders can get good returns in the long run, even in a low-price environment for gold. You’re probably aware that investing in stocks itself is risky, and it's no different in the case of gold stocks.
Given these reasons, investing in gold stocks now is incredibly interesting and it could be a good idea to add a little gold and/or gold stocks exposure to your portfolio as a hedge while it’s cheap in my opinion. If you haven’t gotten your gold stock yet, here are some suggestions.
7 Best Gold Stocks List
Gold price touched a high of $1,688.60 on Feb 24, the highest since January 2013. Moreover, so far in 2020, gold has gained around 10%. Interestingly enough, this is following the impressive performance in 2019, as gold gained nearly 19% which is the biggest annual increase since 2010.
Regardless of the short term, most analyses refer that gold is in the bullish trend in the long term, and analysts expect that gold is going to continue running for the next couple of years or at least for the foreseeable future. Thus, these times seem truly good for investors to add some gold stocks to their portfolio. Here are the top 7 gold stocks to think of, with the best value, earnings growth, and most momentum.
Kinross Gold Corp (KGC)
Kinross Gold (NYSE: KGC) is a gold mining company based in Canada, whose operations extend beyond the borders. While the current projects of Kinross Gold don't include any Canadian sites, they have exposure in the U.S., Brazil, Russia, and the West African nations of Mauritania and Ghana in addition to its exploration sites in Chile and elsewhere.
Barrick Gold Corporation (GOLD)
Barrick Gold (NYSE: GOLD) is a gold mining stock based in Canada, and it's one of the best gold stocks to invest in as being the leading gold producer.
The key strengths that Barrick has; large size and scale, with the biggest high-grade reserve base, as it stands out as one of the lower-priced stocks to invest in. Moreover, Barrick Gold runs mining operations based in 10 different countries.
They aim to be the leading mining company, focusing on gold by operating high-quality assets, operational excellence, and allocating capital strategically.
Newmont Corp (NEM)
Newmont (NYSE: NEM) NEM is a stock that could be classified as an anchor investment. But while NEM stock probably wouldn’t make you rich like the high-risk and high-reward gold stocks, it’s also the least likely to leave you in red.
Newmont Goldcorp resulted from the 2019 merger of Newmont Mining and Goldcorp, the Canadian-based company. And it’s the only gold mining stock found in the S&P 500 index. Moreover, its operations go well beyond gold, with mining in silver as well as base metals like copper, lead, zinc, and nickel. Newmont Goldcorp also mines and produces uranium and lithium and historically even has coal, oil and gas exposure.
Newmont has a level of stability that you can’t find with other competitors as it’s considered the largest gold producer in the world. Moreover, NEM stock has ranked highly for its solid valuation and strong growth momentum, according to Stockrover.com.
Royal Gold (RGLD)
Royal Gold (NASDAQ: RGLD) is one of the most revered companies in the gold and silver industry, especially when thinking of mitigating the price fluctuations for precious metals.
With exposure to the streaming, the company that’s based in Denver provides a mining project besides an upfront deposit in exchange for metals produced at that mine for a predetermined price for an established timeframe.
Royalties can be represented as the right to a percentage of metal production outputs. As Royal Gold is not directly exposed to gold mining operations, its stocks are typically more stable than other companies. Consequently, RGLD stock could be a hedge inside the precious metals sector. As it's hard to predict the domestic or geopolitical events that will unfold, it would be a smart move to have this stock in your portfolio.
Sibanye Gold (SBGL)
Sibanye Gold (NYSE: SBGL) is certainly one of the most compelling names among gold and silver stocks, based in resource-rich South Africa. Sibanye will likely remain a relevant sector player for many years to come.
This is due to its activity production of platinum group metals. South Africa is the top producer of the rare precious metal palladium, second only to Russia. As palladium is a highly desired commodity, its price revolves around $2,200. And with the massive growth in demand and an exclusive list of producers, this dynamic supports SBGL stock.
Franco Nevada (FNV)
Franco Nevada (NYSE: FNV) is a Toronto, Ontario, Canada-based company and one of the best-performing gold stocks in history as well as being completely debt-free. FNV is a streaming/royalty company rather than a miner.
This means it doesn't mine gold itself, but it provides financing to other companies that mine in order to help them operate and develop their mines. In return, the gold streaming/royalty company gets either a percentage of the profits from that mine or it gets the right to buy a certain amount of produced gold at a discounted rate, like $400 per ounce.
This business model of streaming/royalty companies is significantly safer than miners or gold miners ETF due to their low break-even prices on gold, at hundreds of dollars below mining AISC values. However, they also have two main downsides compared to miners. First, as they’re safer, and they are also less explosive when gold prices spike up. Second, while the business model looks so good, there is a risk that too many players can crowd out space and reduce forward returns.
Sandstorm Gold (SAND)
Sandstorm Gold (NYSE: SAND) is a gold streaming and royalty company based in Vancouver, British Columbia. Similar to Franco Nevada (FNV), while SAND is not a gold mining company, this doesn’t make it any less lucrative! Sandstorm Gold provides financing for the mines that gold mining companies operate. In return, it gets either a percentage of mines' profits or the right to buy a certain amount at a very low cost.
Investing in SAND, rather than an actual mining company, allows investors to benefit from increasing gold prices and growing gold production. The investors could also have leveraged upside without the downside from cost overruns they could run into with a gold miner. However, while Sandstorm is not a typical gold mining company, it has a lot to offer!
Pros & Cons of Gold & Silver Stocks
When it comes to the best potential gold investment in your specific situation, you will need to look at the pros and cons of the way you have chosen in order to evaluate which is a better choice for your investment goals. Investing in gold stocks also has its own pros and cons. Let’s begin with the pros.
- The demand for gold and silver is high as it has sentimental and cultural value.
- Buying precious metals stocks could be the best way to maximize the benefits of gold and silver investments.
- Gold is globally considered a safe haven in times of market turmoil.
- Precious metals are excellent diversification tools for an investment portfolio.
- Investing in the stocks of the companies that involve in the exploration and mining of precious metal is gainful for many investors.
- Gold and silver stocks are a convenient and cost-effective way to invest in gold, as you don't have to pay high-commissions with bearing additional costs and risks related to transportation, insurance, and storage of the precious metal.
- Gold and silver stocks could offer the highest potential return to investors as in theory, the company's share price should eventually reflect the company's operational and financial growth. That means shares of the strong gold company could maximize the returns for invested capitals, and committed to the shareholders as they can get good returns in the long run, even in a low-price environment for gold.
But like most things in life, investing in precious metals stocks has both advantages and drawbacks. Let’s address the potential downsides of buying a gold stock.
- In the case of buying gold stocks, you don’t personally own the gold.
- Unsurprisingly, any gold-related investment comes with its fair share of volatility and risk.
- The value of shares in these companies is generally fluctuating up and down very closely following the price of gold. You’ll reap the benefits of good times, but you’ll also be subject to the business decisions of the company. Particularly, you’ll see that the share price reflects not only the price of gold but also the company’s forecasts on future gold prices.
After going through the extensive list we prepared for you on gold stocks, you'd probably conclude that checking out stock comparisons is an effective way to research the companies with the best performance. However, all the previously-listed companies (regardless of their main focus) whether it be innovation or the environment, are all currently prosperous and are projected to have continued success.
Companies in the gold industry are mainly involved in two areas; gold mining and gold streaming. In spite of the fact they are two different business models with pros and cons for each, both of them have an outlook to be profitable in 2020!
You may also want to think about whether you’d like to invest in a company centered in the United States, or if you’re comfortable investing in businesses based overseas. Whatever the stock/stocks you choose to invest in, you can put your mind in ease, knowing that a list of the most profit-generating investment opportunities is now in your hands!