2 TSX Stocks That Could Benefit From a Gold Rally

If gold continues to rise then there’s a good chance that Barrick Gold Corp (TSX:ABX)(NYSE:GOLD) will too.

| More on:
Gold bars

Image source: Getty Images

If you’re worried about a recession, now might not be a good time to look at the price of gold. The commodity, which tends to rise when the economy is weak, is up about 15% this year (it’s currently at $1502 as of this writing).

Although there are no reliable signs of a North American recession just yet, many signs point to one coming in the future. One of the big signs would be inverted yield curves; the current strength in gold could potentially be another.

Of course, a rising price of gold doesn’t necessarily mean that a recession is coming. But if the commodity is doing well either way, then I believe it can’t hurt to get some in your portfolio. The following two stocks stand to benefit from continued strength in gold — and could do particularly well in the event of a recession.

Barrick Gold Corp

Barrick Gold Corp (TSX:ABC)(NYSE:GOLD) is the largest gold mining company in the world. In 2016, it produced 5.52 million ounces of gold and had 85.9 million ounces in proven reserves. The company also mines copper.

As a gold mining and marketing company, Barrick stands to benefit from a rise in the price of gold. The higher gold goes, the more revenue the company generates, and the higher its profit margins (all other things the same). Barrick has historically struggled with debt, but has trimmed down after recent restructuring.

In its most recent quarter, Barrick mined 1.353 million ounces of gold, delivered $0.09 in earnings per share, and maintained its quarterly dividend of $0.04. The company’s total gold output was slightly less than in the prior quarter, when it mined 1.367 million ounces, but the price of gold was higher in the more recent one.

Kirkland Lake Gold Ltd

Kirkland Lake Gold Ltd (TSX:KL) is a mining company that extracts gold in Canada and Australia. The company is targeting 950,000 to 1 million ounces of gold mined for 2019.

Kirkland Lake has done extremely well since it went public just a few years ago, with its stock up over 2,000% since it started trading on the TSX index.

Like Barrick, Kirkland stands to earn more revenue when gold is strong. And if the company’s latest results are any indication, that’s exactly what’s happening. In its most recent quarter, Kirkland earned $104 million, up 69% from the same quarter a year before. Revenue was $281 million, up 31% from the same quarter a year before. Operating cash flow increased 52%, although free cash flow declined slightly. For the entire year-to-date, earnings were up 92% from the same period a year before.

These are pretty incredible results, and if gold remains strong, then there’s no reason they can’t continue. Particularly encouraging is the fact that Kirkland continues to invest heavily in exploration, having spent $48 million on growth projects in Q2. If the company’s new initiatives do anywhere near as well as its existing operations, then we can expect more good news in the future.

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 Andrew Button has no position in any of the stocks mentioned.

More on Metals and Mining Stocks

tsx today
Metals and Mining Stocks

TSX Today: What to Watch for in Stocks on Monday, January 30

Corporate earnings and the Fed’s interest rate decision will remain on Canadian investors’ radar this week.

Read more »

Electric car being charged
Tech Stocks

Is Now The Time to Buy EV Stocks?

EV stocks may be down now, but don't count them out. They'll soon be back up again, so now may…

Read more »

Hands protect a sprout in fertile soil.
Metals and Mining Stocks

Nutrien Stock: How High Could it Go in 2023?

After Nutrien's record 2022 driven by strong pricing power, 2023 should see more of the same, driving the stock much…

Read more »

Gold bullion on a chart
Metals and Mining Stocks

Silver and Gold Stocks: Worth Owning in 2023?

The stock market took a breather from bears as inflation slowed. But recession fears still loom. Should you buy gold…

Read more »

Metals
Metals and Mining Stocks

BUY ALERT: Why I’m Snagging Russel Metals (TSX:RUS) Stock Today

Russel Metals Inc. (TSX:RUS) has started hot in 2023 and boasts nice value and a strong dividend in late January.

Read more »

tsx today
Metals and Mining Stocks

TSX Today: What to Watch for in Stocks on Wednesday, January 25

TSX investors may want to keep a close eye on the Bank of Canada’s monetary policy event today.

Read more »

silver metal
Metals and Mining Stocks

How to Invest in Precious Metals Without Buying a Mining Stock

Do you want to invest in precious metals without buying a mining stock? This unique business can offers a lower-risk,…

Read more »

A tractor harvests lentils.
Metals and Mining Stocks

5 Things to Know About Nutrien Stock in January 2023

Nutrien Ltd. (TSX:NTR) stock has put together a nice run on the back of strong fundamentals and geopolitical tensions.

Read more »