How You Can Participate in the Surging Gold Price

Stocks such as Agnico Eagle Mines Ltd. (TSX:AEM)(NYSE:AEM), Barrick Gold Corp. (TSX:ABX)(NYSE:ABX), and Franco-Nevada Corporation (TSX:FNV)(NYSE:FNV) have had a great year.

This year has not been a kind one for investors, but there has been one notable exception: gold has performed remarkably well. We’ll take a look at why and show some different ways you can participate.

Why gold has surged

There are two main reasons why gold has surged so much in 2016. First of all, the U.S. Federal Reserve has indicated that interest rate hikes won’t happen as quickly as previously thought. This has made gold (which, of course, doesn’t pay interest) a more attractive investment by comparison. The Fed’s shift has also weakened the U.S. dollar–another positive for the gold price.

Secondly, the fear that has gripped equity markets has prompted investors to shift more into gold. All of a sudden, gold is more attractive than at any time in the last three years.

There’s an argument that this is just the beginning of a new surge in the gold price. After all, there are signs that China will continue to struggle, and this would have a serious effect on the global economy.

Some safer ways to bet on gold

The simplest way to invest on gold is through an exchange-traded fund. For example, you could go with the iShares Gold Bullion ETF (TSX:CGL) or Horizons COMEX® Gold ETF (TSX:HUG).

But gold mining stocks are also fairly cheap these days, and there are some miners that don’t come with significant operational risks. One example is Agnico Eagle Mines Ltd. (TSX:AEM)(NYSE:AEM), whose producing assets are all in stable countries. The company also has a strong operating history as well as a stable dividend.

A third option is to go with a royalty company like Franco-Nevada Corporation (TSX:FNV)(NYSE:FNV). These types of companies come with higher price tags, but they don’t come with the same operational risks and their historical returns have been strong.

Some riskier ways to bet on gold

If you’re really looking to bet on the price of gold, then there are riskier ways to do so. The first option that comes to mind is Barrick Gold Corp. (TSX:ABX)(NYSE:ABX). The company has made significant progress deleveraging, but still has a lot of debt on its balance sheet. This makes the company’s stock especially sensitive to gold prices.

Other options include Kinross Gold Corporation (TSX:K)(NYSE:KGC) and Yamana Gold Inc. (TSX:YRI)(NYSE:AUY), both of which have run into problems in recent years. So if you do buy any of these stocks, make sure they aren’t big bets, and you’ll still get plenty of leverage to gold.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Benjamin Sinclair has no position in any stocks mentioned.

More on Metals and Mining Stocks

A stock price graph showing growth over time
Metals and Mining Stocks

Why Cameco Stock Soared 23% This Year

Cameco stock continues to ride high on strong supply/demand fundamentals and growing momentum in the nuclear industry.

Read more »

growing plant shoots on stacked coins
Stocks for Beginners

1 Copper Stock to Buy as Copper Prices Shine

The price of copper continues to climb, and more copper production is on the way for this top stock up…

Read more »

silver metal
Metals and Mining Stocks

Buy the Dip: 1 Dividend Stock Due to Shine

This dividend stock's dividend just rose higher as the price of silver dropped, but don't let that scare you off…

Read more »

risk/reward
Metals and Mining Stocks

Iron Stomach? 2 Riskier Stocks That Could Pay Off Big Time in the Future

Two TSX stocks could deliver greater earnings to investors with higher risk appetites.

Read more »

Gold bullion on a chart
Metals and Mining Stocks

This Gold Stock Just Dipped 5%: Time to Buy?

This gold stock has been rising higher and higher but recently went through a 5% dip in share price. So,…

Read more »

Gold king in chess game face with the another silver team on black background (Concept for company strategy, business victory or decision)
Stocks for Beginners

Pan American Silver: Buy, Sell, or Hold?

PAAS stock (TSX:PAAS) is up 44% in the last year alone! But it's not all down to the rise in…

Read more »

Nuclear power station cooling tower
Metals and Mining Stocks

1 Canadian Mining Stock Worth a Long-Term Investment

Strong fundamentals should continue to boost Cameco stock's long-term outlook, as the nuclear industry's momentum continues.

Read more »

Super sized rock trucks take a load of platinum rich rock into the crusher.
Metals and Mining Stocks

Lundin Mining Stock: Buy, Sell, or Hold?

Lundin (TSX:LUN) stock saw its shares surge this last year with the price of copper, and more strong guidance could…

Read more »