3 Gold Stocks: A Solid Bet Against World Volatility

You’ve heard it before: Gold is known for volatility and its uncanny ability to rise during negative cycles. In fact, its unpredictable nature causes some investors to head for the hills (and not the “there’s gold in them thar hills” variety). 

However, with the Russian invasion and the seemingly impossible task of “calming down” inflation, it’s possible that gold stocks might offer a great option for investors, particularly if rampant uncertainty continues to stick around for the long term.

Think you might be interested in purchasing gold stocks? Read on for our top picks, then learn more about other inflation-proof stocks worth the price.

Why Buy Gold Stocks?

Buying gold stocks = antiquated? As a symbol of monetary payment, it may seem like such an antiquated relic that it seems as if you’re putting your money in a time warp. For every investor you find that pooh-poohs gold’s value, you’ll also find investors who look for alternative solutions beyond our current prevailing form of currency, paper money.

Naturally, holding gold in its physical form doesn’t necessarily appeal. Storing gold at home carries a large risk and storing it can add up in cost over time. Beyond gold bullion and coins (which obviously offers less of a storage problem than gold bars), you can invest in a few different options, including gold exchange-traded funds (ETFs) and mutual funds, gold futures and options and gold mining options. 

  • Gold ETFs and mutual funds: You can turn to gold exchange-traded funds (ETFs) through any brokerage or IRA. You’ll pay less for these passive funds due to historically low expense ratios compared to mutual funds. However, you may want to opt for actively managed mutual funds due to their diversification, ease of ownership and low initial minimum investment. 
  • Gold futures and options: Holding gold futures means that you buy or sell gold on a particular date in the future using futures contracts. You can also search for low margin requirements and low commissions. Options, on the other hand, give you an option to buy the futures contract within a certain time frame at a preset price. Note that futures may give you a cheaper way to buy or sell gold over options.
  • Gold mining companies: You can also directly invest in gold mining companies through a brokerage or IRA. It’s a good opportunity for investors who have a lot of time to dedicate toward researching the pros and cons of various gold mining companies.

3 Gold Stocks Worth Exploring

We’ll focus on gold mining companies in this piece in lieu of gold ETFs and mutual funds, futures and options. Let’s check out several gold mining stocks you may want to consider.

BARRICK GOLD CORPORATION (NYSE: GOLD)

Barrick Gold Corporation, a sector-leading gold and copper producer, lists on the New York Stock Exchange under the symbol GOLD and on the Toronto Stock Exchange under the symbol ABX. Barrick recently merged with Randgold Resources and combined all gold mines in Nevada with Newmont Corporation in a joint venture called Nevada Gold Mines. The company operates the Cortez, Carlin and Turquoise Ridge in Nevada, Loulo-Gounkoto in Mali, Kibali in the Democratic Republic of the Congo and Pueblo Viejo in the Dominican Republic. The company operates gold and copper mines and projects in 13 countries in North and South America, Africa, Papua New Guinea and Saudi Arabia. 

Barrick’s year-end profit sheet showed net cash at $130 million after the record cash distribution of $1.4 billion to shareholders. Its Q4 dividend increased 11% to 10 cents per share. In addition, Nevada Gold Mines achieved its highest quarterly production since its formation and shored up a strong Q4 for Lumwana with Jabal Sayid at the top end of the production guidance range. 

The company showed an operating cash flow of $1.4 billion and free cash flow of $0.7 billion for Q4 and net cash of $130 million after a record $1.4 billion distribution to shareholders in 2021. The company also had 2021 net earnings of $1.14 per share and adjusted net earnings of $1.16 per share.

GOLD FIELDS LTD. (NYSE: GFI)

Gold Fields Ltd., headquartered in Johannesburg, South Africa, is a gold mining company that produces gold and operates mines. Its operating mines are located in Australia, Ghana, Peru and South Africa.

Basic earnings for 2021 increased by 9% year-over-year to $789 million or $0.89 per share and headline earnings for 2021 increased 22% year-over-year to $890 million or $1 per share.

Normalized earnings for the year were 6% higher at $929 million or $1.05 per share 

Adjusted free cash flow from the operations for the year was $913 million compared to the $868 million generated in 2020. The company also saw a decrease of $100 million of net debt, ending the year at $969 million, with a net debt to adjusted EBITDA ratio of 0.40x. Net debt was $1,069 million in 2020 with a net debt to adjusted EBITDA ratio of 0.56x at the end of 2020. 

WHEATON PRECIOUS METALS CORPORATION (NYSE: WPM)

Wheaton Precious Metals Corporation, headquartered in Vancouver, British Columbia, Canada, is a mining company that sells precious metals in Canada and internationally. The company sells gold, silver, palladium and cobalt deposits and has agreements for 23 operating mining assets and 10 development stage projects. 

The company saw nearly $200 million in operating cash flow during Q4 2021 and a record $845 million during the whole year in 2021. It also saw $278 million in revenue during Q4 and a record $1.2 billion during 2021, with $132 million in adjusted net earnings and a record $592 million during 2021.

The company produced 752,958 gold equivalent ounces and also announced a new precious metal purchase agreement on Artemis Gold Inc.’s Blackwater Gold Project and announced gold and platinum production on Generation Mining Limited’s Marathon Project. The company also declared a quarterly dividend of $0.15 per common share.

Ready to Buy Gold Mining Stocks?

Even if it seems to you that buying gold mining stocks may seem like going backward. The fact is, they’re commodities. You’re not going to get the benefit of dividend-paying stocks with gold stocks, and historically, dividend-paying stocks offer a great hedge against inflation.

However, it’s worth noting that historically, gold has also offered a hedge against inflation. It’s worth some major consideration.

Originally published on MarketBeat.com

Leave a Comment