As fears of a global recession amid rising inflation continue making the market volatile, it is not surprising to see stock market investors worried. Such conditions can diminish investment returns, limiting the upside that many expect to get from their long-term holdings. Fortunately, investors have a few options to safeguard their self-directed portfolios from devastation.
While the stock market offers several options for investors worrying about inflation, gold has long stood as a go-to safe-haven asset. As inflation rises, so do commodity prices, especially gold and other precious metals. That said, buying gold bullion presents several challenges and does not offer you enough liquidity that will let you reinvest in the stock market quickly.
A smart way to gain exposure to gold prices would be to remain invested in the market by reallocating some of your capital to mining stocks. Today, I will discuss two TSX stocks that can give you exposure to the mining industry.
Barrick Gold (TSX:ABX) is among the best mining stocks available in the stock market right now. The $39.44 billion market capitalization company headquartered in Toronto has gold and copper mining operations across 13 countries worldwide. Generating most of its revenue through gold production, Barrick Gold directly benefits from rising gold prices.
The mining company has been ramping up production to achieve its 2023 target and has a new mining project under development in Pakistan. The new project is one of the largest unexplored gold and copper mines in the world.
While operations might not begin until 2028, it can provide a strong boost to Barrick Gold in the coming years. With the Middle Eastern and African mining operations beginning earlier than scheduled, its gold production increase is a positive development.
As of this writing, Barrick Gold stock trades for $22.47 per share, boasting a 3.29% dividend yield that you can lock into your portfolio before share prices begin rising.
Franco-Nevada (TSX:FNV) is a $36.15 billion market capitalization company headquartered in Toronto that also offers you exposure to gold. Unlike Barrick Gold, it does not have its own mining operations. Instead, it operates as a gold-focused royalty and streaming company. It owns a diversified portfolio of precious metals and royalty streams, generating most of its revenue through gold.
The company’s performance is linked to the price of commodities and the production from assets within its portfolio in the short term. For its long-term financial performance, it relies on the availability of exploration and development capital.
In exchange for upfront payments, Franco-Nevada stock gets revenue by offering ownership rights to a fixed percentage of gold revenue or production to others. Its diversified portfolio and lower-risk business model allow Franco-Nevada to manage risks and provide liquidity to investors efficiently.
As of this writing, Franco-Nevada stock trades for $188.50 per share, boasting a 0.96% dividend yield. Trading at a 13.41% discount from its 52-week high, it could be a good time to invest in its shares to capture wealth growth through capital gains.
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Given rising inflation rates and the need for an effective hedge, stocks operating in the mining industry can be an excellent bet for Canadian investors. Barrick Gold stock and Franco-Nevada stock allow you to bet on gold prices without taking your money out of the market.
Among the two, Franco-Nevada stock would be my pick due to its relatively lower-risk business model through gold and silver streaming.