Should You Buy Gold Stocks In 2023?

Investors bullish on gold can consider buying mining stocks such as Barrick Gold right now.

| More on:
stock market

Image source: Getty Images

Gold has been a popular asset class among global investors for a few centuries now. Viewed as a store of value and a hedge against inflation, gold prices have increased at a consistent pace over time.

In March 2022, gold prices touched US$2,050 per ounce due to the Russian invasion of Ukraine and rising geopolitical tensions. But continuous interest rate hikes acted as a headwind for gold prices as they fell to US$1,650 per ounce by Q3 2022.

Gold prices and interest rates have an inverse relationship, but the yellow metal gained pace towards the end of 2022 to currently trade at more than US$1,800 per ounce.

In 2023, the threat of an upcoming recession may continue to pressure major equity indices. A recession will also lower inflation and result in a deceleration in rate hikes, both of which should drive gold prices higher this year.

In case you expect gold prices to move higher in 2023, you can also consider investing in shares of gold mining companies. Theoretically, miners can benefit from economies of scale by expanding production and reducing costs.

Here are three such gold mining stocks investors can look at right now.

Barrick Gold

One of the largest companies on the TSX, Barrick Gold (TSX:ABX) operates tier mining assets. According to Barrick Gold, these assets are low-cost and have the ability to produce over 500,000 ounces of gold annually, with at least 10 years of productive life remaining. The mining giant, in fact, expects to extract 5.5 million ounces each year through 2031.

In addition to a top-tier mining portfolio, Barrick Gold is also equipped with a strong balance sheet. In the last few years, it has lowered debt by selling off noncore assets and generating stable free cash flows.

Due to lower interest costs, Barrick Gold enjoys significant financial flexibility and also pays investors a dividend of $0.72 per share annually, translating to a dividend yield of 2.8%. In the last 20 years, Barrick Gold has increased dividends at an annual rate of 6.6%. Analysts remain bullish on ABX stock and expect it to gain another 10% in the next year.

Franco-Nevada

A streaming and royalty company, Franco-Nevada (TSX:FNV) owns a diversified portfolio with exposure to gold, silver, iron ore, and oil and gas. Over 50% of its revenue is generated from gold.

Franco-Nevada has an asset-light business model and earns revenue from royalties, lowering overall risk. The company went public back in 2008 and has increased dividends each year. It currently offers investors a dividend of $1.74 per share, indicating a forward yield of 0.92%. In the last 15 years, these payouts have increased at an annual rate of 9%.

Franco-Nevada is debt free, allowing it to aggressively invest in royalty and streaming agreements in the future as well. These contracts enable Franco-Nevada to create a predictable revenue stream by selling the physical commodities mined on its properties.

Given consensus price target estimates, Franco-Nevada is trading at a discount of 12% right now. The company is well poised to profit from mining the yellow metal without worrying about the risks associated with the same.

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 Aditya Raghunath has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

More on Metals and Mining Stocks

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 »

grow dividends
Metals and Mining Stocks

Invest $5,000 in This Dividend Stock for $1,060 in Passive Income

Franco Nevada stock trades at a 20% discount to consensus price target estimates while offering investors a tasty yield of…

Read more »