Is Now the Time to Buy Gold Stocks?

Gold prices can continue to rally throughout 2023, as inflation and interest rates peak, making undervalued gold stocks some of the best to buy now.

| More on:
gold stocks gold mining

Image source: Getty Images

Many investors find gold to be a valuable part of a long-term portfolio. Because it’s an asset that isn’t highly correlated with many other assets, it can offer important diversification. Furthermore, gold is a good hedge against inflation and a safe-haven asset, so many investors will allocate between 5% and 10% of their portfolio to gold or high-quality gold stocks that they can buy.

Gold stocks are ideal for many investors because you can gain exposure to the yellow metal but also have the potential to earn higher returns, as the price of gold increases.

However, like any commodity, gold prices fluctuate. And over the last year, gold prices have certainly faced many headwinds.

While it’s a hedge against inflation, that’s over the long term. And typically, gold, an asset that doesn’t provide a yield, will underperform when yields rise, which we saw throughout 2022, as interest rates were rising.

Now, however, with interest rates peaking yet still a tonne of uncertainty in the market, gold looks as though it can gain momentum, making high-quality gold stocks some of the best to buy.

Because gold stocks are more volatile than the precious metal, they underperform more when the price of gold is losing value. Therefore, many gold stocks are undervalued in this environment and have significant potential to rally, especially if the price of gold can continue to increase.

So, if you’re thinking of adding some exposure to gold in your portfolio, here are two of the best gold stocks to buy today.

One of the largest gold miners in the world

If you’re looking to add exposure to gold in your portfolio, one of the top gold stocks you can buy is Barrick Gold (TSX:ABX), the massive producer with a market cap of more than $43 billion.

Buying a massive producer like Barrick has several advantages. First, because it’s so large and has operations worldwide, Barrick offers more diversification and, therefore, less risk than a smaller miner.

Furthermore, having operations all over the world can allow Barrick to be more flexible and shift its production to lower-cost mines if the price of gold drops and stays low for more extended periods.

Currently, Barrick is in the middle of a years-long plan where it plans to increase its annual production of gold from 4.5 million ounces in 2023 to roughly 4.7 million ounces by 2027. However, in addition, it’s also expecting that its all-in-sustaining costs (AISCs) will decline from roughly $1,150 per ounce in 2023 to approximately $950 per ounce by 2027.

Furthermore, with the recent uptick in the price of gold, analysts expect Barrick’s revenue in 2023 will increase by 8% year over year, and its earnings per share is expected to increase by over 11% this year.

So, if you’re looking for a high-quality gold stock to buy and add to your portfolio, Barrick is one of the top businesses to consider, especially while it trades nearly 20% off its 52-week high.

One of the lowest-cost gold stocks that you can buy

Although there are many reasons to buy a massive producer like Barrick, there is also a tonne of opportunity when buying a low-cost producer such as B2Gold (TSX:BTO).

Whenever you buy a commodity producer, whether it’s a gold miner or energy producer, being able to produce that commodity for as cheap as possible is a major competitive advantage.

Not only does having low-cost operations allow B2Gold to have higher margins when the price of gold is increasing, it also allows the stock to remain profitable for longer than most of its peers should the price of gold fall substantially.

For example, in 2022, according to B2Gold’s guidance, its AISC is expected to be between $1,010 and $1,050 per ounce. Furthermore, its cash costs are just $600-$640 per ounce.

Therefore, it’s no surprise that B2Gold has impressive margins, generates tonnes of free cash flow, and even pays a dividend with a current yield of roughly 4.3%.

Plus, on top of its impressive operations, B2Gold also has a robust balance sheet with over $750 million in cash and less than $100 million in debt.

So, if you’re looking for a high-quality gold stock that you can buy and hold for years with confidence, B2Gold is one of the best stocks to consider today.

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 Daniel Da Costa has positions in B2Gold. The Motley Fool recommends B2Gold. The Motley Fool has a disclosure policy.

More on Metals and Mining Stocks

Gold bullion on a chart
Metals and Mining Stocks

3 Gold Stocks to Buy as the Materials Sector Rallies

Three gold stocks have surged from 9% to as high as 30% in the last 30 days as the materials…

Read more »

tsx today
Metals and Mining Stocks

TSX Today: What to Watch for in Stocks on Tuesday, March 28

Besides new developments related to the ongoing banking turmoil, TSX investors may want to closely monitor the U.S. consumer confidence…

Read more »

stock market
Metals and Mining Stocks

2 TSX Mining Stocks to Buy as Gold Prices Surge Past $2,000

Bullish on gold? Investing in quality mining and royalty stocks such as Barrick Gold is a solid bet in 2023.

Read more »

Metals and Mining Stocks

Better Metals Buy: Gold Stocks vs. Lithium Stocks

Gold is the evergreen choice as a hedge against inflation and weak markets. In contrast, battery metals may offer unique…

Read more »

tsx today
Metals and Mining Stocks

TSX Today: What to Watch for in Stocks on Wednesday, March 22

The Federal Reserve’s interest rate decision and economic projections are likely to keep the TSX highly volatile today.

Read more »

gold stocks gold mining
Metals and Mining Stocks

Gold Stocks Are Gaining Steam: Are They a Buy at Current Prices?

Gold stocks will likely steal the limelight this year, making up for their last year's underperformance.

Read more »

edit Sale sign, value, discount
Energy Stocks

2 Cheap Canadian Stocks You Can Buy for Less Than $50

You can buy Suncor Energy stock, and this gold stock at cheap valuations today

Read more »

A golden egg in a nest
Bank Stocks

How to Protect Your Retirement Portfolio From a Banking Crisis

The US banking crisis has created a market sell-off. Know how safe your money is and protect your retirement portfolio…

Read more »