Gold Stocks in 2025: Why Royalty Stocks May Outshine Miners

When gold prices surge, mining stocks are typically the better picks. But when there is uncertainty about the metal, royalty stocks may shine brighter.

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Gold prices have been rising steadily for at least 12 months, and in that period, the price per ounce has grown from US$2,000 to US$2,900 (per ounce). There is a strong probability that the gold price will hit US$3,000, and some experts are speculating that the price will go much higher by 2026. This assumption takes into account the continuous rise of gold prices through 2025.

There are multiple factors behind this growth, including trade wars, actual wars, and uncertainty in global leadership. However, as an investor, it’s more important to understand the implications of this trend on gold stocks so you can make an informed decision. The two different types of gold stocks (i.e., mining stocks and royalty stocks) may react differently to continued gold price increases, stagnation, or slump.

nugget gold

Source: Getty Images

A gold mining stock

Canada is home to some of the largest gold miners in the world and that list includes Kinross Gold (TSX: K), which ranks in the 10 most significant gold mining companies in the world. The company produced about 2.1 million ounces of gold equivalent last year and expects to produce at least two million by 2027.

However, a consistent production outlook is just one of the company’s fundamental strengths. Kinross is also a heavily diversified producer with an operational footprint spreading across multiple countries. The company also has access to ample exploration/development inventory.

The gold price bull market has been fantastic for the stock’s performance so far. It rose over 140% in the last 12 months and is still quite fairly valued. It’s the second strongest rally of the decade, and the only downside is the yield, which has fallen below 0.97%. However, the problem with Kinross Gold is that it’s propped up on high gold prices. If the shiny metal enters a correction phase, the stock might sink. Based on the sentiment in the market, the stock slump can both proceed or precede the gold price slump.

A gold royalty and streaming stock

A royalty and streaming giant like Franco-Nevada (TSX: FNV) might be a bit more resilient against a correction, but there is a downside to it as well. It also doesn’t rise as aggressively as miners do when gold prices are going up. In the last 12 months, the stock only grew by about 40%, which is even less than the growth of the underlying metal’s price over the same period.

But let’s look at the upside. Over the long term, Franco-Nevada is likely to be a more consistent and reliable grower compared to gold mining stocks, as evident from the stock’s performance over the last 15 years. Plus, if the gold prices fall, the stock’s slump might also be lagging behind Kinross, and your losses might be far less substantial than in a miner, which offers direct exposure to the underlying asset.

Foolish takeaway

The two blue-chip stocks offer decent growth opportunities right now, albeit with different long-term prospects. Kinross might be a better pick if gold prices keep rising, but if there is a chance that gold prices might come down, Franco-Nevada would be a relatively safe pick. In the long term (in a decade or so), the returns would rely heavily on your exit timing and strategy.

Fool contributor Adam Othman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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