Gold stocks have fallen drastically out of favour amid the recent market correction. Undoubtedly, gold should be outperforming at a time like this, with inflation, recession jitters, and an increase in geopolitical tension. For gold investors, the latest slip in the price of gold has been nothing short of frustrating. Though gold tends to fare better than stocks or bonds, as interest rates rise, the shiny yellow metal seems to be stuck in some sort of rut.
Gold stocks could rise again, as inflation runs hot
Undoubtedly, cryptocurrencies have been viewed as the new-age alternative for gold exposure. Gold and cryptocurrencies both have a limited supply. However, that’s where I believe the comparisons stop. Crypto assets have been way too volatile to reduce the magnitude of risk for a portfolio. Though it may be viewed as an asset to hedge against volatility, I’d argue that it only introduces risk, given its propensity to implode quicker than equities in a panic-induced selloff.
Gold’s recent performance has been questionable at best, but relative to almost everything else, it’s held rather steady. It’s this steady nature that leads me to believe that it’s hard to top the gold standard for investors looking to diversify in the face of mounting macroeconomic risks.
Yes, gold will have its ups and downs, but its correlation to stocks is still relatively low from a long-term standpoint.
In this piece, we’ll look at two gold miners that may be worth scooping up, as broader markets look to regain their footing.
Agnico Eagle Mines
Agnico Eagle Mines (TSX:AEM)(NYSE:AEM) is emerging as one of the most intriguing ways to play the gold space. After acquiring Kirkland Lake, the gold miner now finds itself sitting on even more top-notch assets. Should gold prices steady, Agnico may have walked away with a bargain. Though industry peers may talk down the caliber of Kirkland Lake’s assets, I’d argue that the deal represents a missing piece of the puzzle for Agnico.
At writing, Agnico trades at $69.14 per share after enduring a painful slide from the $80 range. Amid the decline, the dividend yield has swollen to 3%, making it one of the most bountiful ways to play gold.
Agnico will continue to be far more volatile than gold. However, for those looking to improve their portfolio’s Sharpe ratio while getting paid a fat dividend, it’s hard to match the value proposition of Agnico Eagle on the dip. While Agnico may not be the most efficient operations, things are on the right track. Further, the balance sheet is still in great shape, even after merging with Kirkland Lake.
Kinross Gold (TSX:K)(NYSE:KGC) is a $7.5 billion gold and silver miner that’s been in a world of pain recently. Shares lost around 60% of their value from peak to trough. With shares now at $5 and change per share, the stock sits on a nice long-term support level. Undoubtedly, Kinross will be a rockier ride than the likes of a more mature precious metals miner like Agnico. However, for those bullish on gold, a mid-cap miner may be the best way to improve one’s upside.
Currently, the technicals couldn’t look better. With a juicy 2.7% dividend yield, Kinross is yet another productive way to play the precious metal space in the face of profound inflationary pressures.