Gold and silver mining stocks are back in the spotlight, with the recent surge in precious metal prices. With another Federal Reserve rate hike in the books, a recession moving in (I’d say that’s the likeliest scenario right now), bank failures in the United States, and other unforeseen risks to consider, it’s no mystery as to why the appetite for gold and silver has seen a sharp uptick.
As gold hovers around its all-time highs north of the US$2,000-per-ounce level, I think the Canadian miners are worth consideration again. Miners tend to move based on price fluctuations of the commodities they mine. But there is some degree of lag. If you’re in the belief that gold prices will stay elevated (or soar to new highs), the broader basket of Canadian miners look very intriguing at this juncture.
Of course, volatility is a given when investing in any commodity play. The miners are levered to the price of the precious metals they mine. If you’re comfortable with such a choppy ride, you may be able to get a pretty decent bang for your buck over the long haul. Undoubtedly, there’s more gain to be had from some of the junior miners.
Gold and silver investing looks compelling again
However, I wouldn’t look to reach for returns, even if you’re a bull on gold and silver. When it comes to miners, I think it’s always prudent to be ready for the next downcycle. Whether gold has room to run before its next bust remains a mystery. In any case, I think there are better ways to profit from the current gold rally without risking your shirt come the next inevitable pullback in the space.
There are perks of investing in the more mature miners. They tend to be better diversified with seasoned managers. Further, shares may also sport better balance sheets, leaving them able to take advantage of acquisitions when the time is right.
Without further ado, consider Barrick Gold (TSX:ABX), one mature gold miners that could continue to shine through 2023.
Barrick Gold
Don’t look now, but Barrick stock is up over 26% from its March low. In just under a month, the stock has been given a huge jolt, thanks in part to strength in gold. Undoubtedly, U.S. regional bank failures are a big reason gold has regained some of its lustre over the past two months or so. SVB Financial shocked the world when it reached a bit too far for yield in an environment that saw rock-bottom rates.
As rates climbed, losses crept in and spooked depositors. I have no idea when the U.S. regional bank crisis will end. Sometimes, all it takes is time to soothe the nerves of jittery depositors. In the meantime, a gold miner like Barrick is a great way to hedge against further risks brought forth by the U.S. banks.
Barrick has a 2.85% dividend yield and a beta of 0.13. The well-run gold miner is likelier to move higher, even if markets suffer a pullback again due to the “safe haven” nature of gold. With rates on the rise and the possibility that more U.S. regional banks could drop, I’d argue exposing yourself to gold or a top-tier miner is only prudent.
