Should You Buy or Avoid Gold Stocks This Year?

Gold stocks like Barrick Gold Corp. (TSX:ABX)(NYSE:GOLD) have lost momentum in recent months, but they are still worth your attention.

| More on:
Gold bullion on a chart

Image source: Getty Images.

The spot price of gold rose above the US$1,800/ounce mark during today’s trading session. In February 2020, I’d discussed why the COVID-19 pandemic had the potential to spur a run for the yellow metal. Indeed, gold would rise above a record US$2,000/ounce by the middle of the summer. However, that momentum would wane in the face of rebounding stocks and a major resurgence for the cryptocurrency space. Today, I want to discuss whether gold stocks are worth stashing in the latter half of 2021.

Are conditions bullish for gold stocks?

This February, I’d looked at three reasons the current environment was bullish for gold stocks. The Delta variant has led to a sharp rise in COVID-19 cases in the developed world, even in countries with high vaccination rates. These unfortunate numbers mean that further restrictions and lockdowns may be in our future in the fall and winter. This will likely slow down the economic rebound North America has enjoyed in recent months.

Central banks have committed to historically low interest rates and fiscal aid to their citizens. This climate is unlikely to change in the near term. Investors should prepare for this reality. Gold stocks have performed well in the face of these conditions in the past.

Two gold stocks I’m looking to snatch up before the fall

Barrick Gold (TSX:ABX)(NYSE:GOLD) is one of the largest gold stocks on the planet by market cap. Its shares have dropped 19% in the year-to-date period as of early afternoon trading on August 23. The stock is down 33% from the prior year.

The company released its second-quarter 2021 results on August 9. Barrick suffered a mechanical mill failure at one of its major projects, but it is still on track to meet guidance for the full year. Its realized gold price of US$1,820/ounce was up from Q1 2021 and Q2 2020. Meanwhile, adjusted net earnings were reported at $513 million — up from $415 million in the prior year. Adjusted earnings per share rose to $0.29 compared to $0.23 in Q2 2020.

This gold stock last had a price-to-earnings (P/E) ratio of 13. That puts Barrick in favourable value territory. Moreover, it offers a quarterly dividend of $0.09 per share. This represents a modest 1.7% yield.

Yamana Gold (TSX:YRI)(NYSE:AUY) is a Toronto-based gold producer. This gold stock has dropped 28% in the year-to-date period. The company unveiled its second-quarter 2021 results on July 29.

The past quarter was another strong one for Yamana. Like Barrick, it benefitted from the year-over-year increase in the spot price of gold. However, these numbers will slip if gold cannot gain momentum in the third and fourth quarters of fiscal 2021. Yamana also posted strong cash flows from operating activities of $153 million. It reported adjusted net earnings of $70.7 million, or $0.07 per share.

Shares of this gold stock possess a P/E ratio of 24. This means the stock offers solid value relative to its industry peers. It offers a quarterly dividend of $0.03 per share, representing a 2.7% yield.

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 Ambrose O'Callaghan has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned.

More on Metals and Mining Stocks

Nuclear power station cooling tower
Metals and Mining Stocks

Dividends From the Deep: Can Cameco’s Uranium Resurgence Boost Payouts?

Cameco (TSX:CCO) stock pays a dividend. Could the recent rise in uranium prices take it higher?

Read more »

tsx today
Metals and Mining Stocks

TSX Today: What to Watch for in Stocks on Wednesday, December 6

Falling commodity prices could weigh on TSX stocks today, as investors await the Bank of Canada’s interest rate decision.

Read more »

tsx today
Metals and Mining Stocks

TSX Today: Why Canadian Stocks Could Fall on Monday, December 4

The commodity market’s heavy losses in early trading could drive the main TSX index downward at the open today.

Read more »

A miner down a mine shaft
Metals and Mining Stocks

2 Top TSX Mining and Materials Stocks to Buy for December 2023

You can buy these two TSX mining stocks in December 2023 to expect market-beating returns in the long run.

Read more »

Watch for the Warning Signs Stock Market Prices Trends 3d Illustration
Dividend Stocks

Where Smart Money is Going as Canadian Interest Rates Climb

The interest rate climb is nearing its end. Smart investors are using this trend to invest in stocks with an…

Read more »

stock market
Metals and Mining Stocks

Time to Invest in Gold? 2 Shining Miners to Watch in 2024

Agnico Eagle Mines (TSX:AEM) and another TSX gold miner that could rise sharply into the new year and beyond!

Read more »

Nuclear power station cooling tower
Metals and Mining Stocks

Cameco Stock Is up 92% This Year: Is it Still a Buy?

Cameco (TSX:CCO) stock could have more room to run, as nuclear power experiences a massive comeback.

Read more »

tsx today
Metals and Mining Stocks

TSX Today: What to Watch for in Stocks on Thursday, November 30

The main TSX index remains on track to end November on a strong bullish note, as it has already risen…

Read more »