Gold stocks are back in the spotlight after enduring a lengthy hangover since peaking out back in 2020 at just north of US$2,000 per ounce. As the price of gold looks to test new highs, it may be wise to give the many battered gold miners a second look before the precious metal rally looks to extend.
Of course, gold and silver investing is a tough game to master. Gold moves in an unpredictable fashion. When uncertainties and perceived risks are at a high point, gold can really pick up traction. With a pandemic, high inflation, and recent bank failures in the U.S. market weighing heavily on investor sentiment, it’s not a mystery as to why gold has been shining so brightly in recent months.
Though it’s hard to predict where gold goes from here, I do think it’s wise to consider allocating a small portion of your portfolio to an undervalued miner that sports a bountiful dividend yield. Gold’s run won’t last forever, and it’s likely to be outdone by stocks over an extremely extended time horizon. That said, if you view gold as a portfolio diversifier, I do think it makes a lot of sense to be nibbling away at gold shares right here, right now.
Gold has shined of late. Time to add some exposure to your portfolio?
In this piece, we’ll have a look at one intriguing precious metals stock to consider if you’re getting bullish on gold and lack exposure to the asset class. While gold (or its miners) won’t give you the type of returns that stocks can provide over the course of the long haul, it can help you stay rich and weather any potential storms in the future, including the ones that aren’t on anybody’s radar.
Indeed, it’s the risks that we don’t see that can harm our portfolios the most. In that regard, gold tends to shine when our stocks begin to lose their lustre.
Without further ado, let’s consider premier gold miner Barrick Gold (TSX: ABX), which is up more than 35% since the lows of November 2022.
Barrick Gold
Barrick Gold is the second-largest gold miner and a heavyweight champ when it comes to Canadian gold stocks, with more than 4.1 million gold ounces (and 440 pounds of copper) produced last year. It’s a $45.5 billion behemoth with solid managers and pristine production assets.
Most importantly, the stock sports a juicy 2.83% dividend yield, which appears safe. Of course, dividend cuts are possible if gold implodes on itself. However, given all the risks on the minds of investors, I’d argue a big gold sell-off seems doubtful as long as recession, inflation, bank failures, and mass layoffs remain top of mind.
Gold may be flirting with new heights, but Barrick stock is closer to its 2022 lows than its 2020 highs. I believe that’s an opportunity if you think gold can stay above the US$2,000 per-ounce mark for longer.
Currently, shares of ABX are down around 34% from their all-time highs just shy of $40 per share. The longer gold stays shiny, the more upside Barrick and its gold-mining peers have. Even if the gold rally falters a bit, the 0.13 beta (which entails lower correlation to the TSX Index) could pay off if the market turns suddenly at the hands of a recession.
Indeed, a high dividend and lowly correlated gains potential are intriguing at a time like this. At this juncture, Barrick’s my top pick to play the gold space.
