Gold stocks have been wild movers over the past month. With regional U.S. banks failing, many investors felt a tad uneasy. Though gold’s recent run has since cooled, with the shiny precious metal pulling back below the US$2,000-per-ounce level, I still think the broader basket of Canadian gold miner stocks are worth a second look.
Not only are mining stocks great ways to hedge your bets with exposure to precious metals, but they are also a pretty impressive way to generate passive income. Depending on which gold or silver stocks you aim for, you could obtain a 2-3% dividend yield. Undoubtedly, investing in gold can be quite rewarding, even if price movements don’t go your way.
Though yields on select gold stocks are handsome, investors must be aware of the risk of investing in a precious metal miner. Gold prices fluctuate wildly on any given week. And mining stocks are likely to amplify such volatility. That’s due to the leveraged nature of firms that mine gold and other minerals.
Gold stocks can shine for your portfolio when the going gets rough
Gold prices are very hard to forecast. Indeed, speculating in gold may be a bad idea if you’re looking for next-level gains beyond traditional asset classes. However, as a hedge against a black swan, gold can serve a critical component of a diversified portfolio.
Just don’t expect gold to generate huge returns over an extended period of time. The asset class isn’t the most rewarding. But it can be worth its weight in gold (sorry for the gun) when times get really ugly!
In a way, having a bit of gold can be viewed as hedging against the scary unknowns. We should all have a plan for dealing with risks that we don’t see. That’s only prudent!
Barrick Gold (TSX: ABX) and Newmont (NYSE: NEM) are great options in the gold space right now.
Barrick Gold
Barrick Gold is the top Canadian precious metals miner that’s started to wake up in recent weeks. The stock is now up around 17% from its March 9th low.
Indeed, banking failures down south helped prop up gold prices and shares of Barrick. I think the recent run in gold has legs. As Barrick looks to recover the ground lost since the scary days of 2020, I think today’s multiple makes a lot of sense for new gold investors looking to dip a toe in the waters.
The stock yields 2.88%, which is generous for a miner. Further, the 0.14 beta implies shares are less likely to fall hand in hand with the TSX Index. At 76.1 times trailing price to earnings, Barrick may seem a bit expensive. But given the recent run in gold, I view Barrick as cheaper than it looks.
Newmont
Newmont stock is down 43% from its 2022 all-time high. With a 3.29% dividend yield, shares are more bountiful than Barrick. Newmont’s chief executive officer Tom Palmer recently express disappointment with Newcrest Mining, which turned down a US$17 billion takeover offer.
As Newmont moves closer to its next mining deal, I think investors have a lot to be excited about. For now, Newmont shares are one of the most bountiful ways to play the space. If gold makes a run for new highs, I expect NEM stock could be among the first to rally.
The 0.32 beta implies a low correlation to the broader market. However, shares are a tad more correlated than Barrick.
