The price of gold is hitting new highs. Here are four ways to invest in gold today, brought to you by Motley Fool Canada Chief Investing Officer Iain Butler.
Prefer to read? There’s a transcript below.
Transcript
Nick Sciple: I’m Motley Fool Canada senior analyst Nick Sciple, and this is “The Five-Minute Major,” here to make you a smarter investor in about five minutes.
Today we’re discussing gold, the best-performing asset class so far in 2025. My guest today is Motley Fool Canada Chief Investment Officer, Iain Butler. Iain, thanks for being here.
Iain Butler: Great to be here, Nick.
Gold’s performance in 2025
Nick: Gold is up nearly 30% so far this year, crushing the TSX and making new all-time highs. Iain, what is driving this outperformance for gold?
Iain: Like you say, commodities are up 30%. The gold subsector in the S&P TSX composite index is up 42% when I just checked before we hopped on here. So that’s just trouncing the Canadian index, which sits down by about 3% year to date. And it’s been a real differentiator for the Canadian market, because the Canadian market’s about 10% in the gold subsector. And it’s given us a real edge over the U.S. indices that don’t have near that kind of exposure. So the S&P 500 is down by more than 10%, just because it hasn’t had that heavyweight sort of providing that oomph like we’ve had.
Why gold prices are rising
Those are some numbers just to frame the performance. But from there, it gets a lot more difficult to explain why gold is performing as it is, and I think the reason for that is something that Warren Buffett actually has put forward a number of times and has explained. But gold is essentially a non-productive asset, so unlike a farm, which is an example that Buffett has used, where you can grow crops that generate income for the farmer and are productive to society, or a business that generates and ideally grows cash flows … Gold really doesn’t do anything. Just kind of sits there. It’s not really used in many industrial processes or has much of a purpose, so that makes it very hard to point to evidence when it comes to explaining the performance of gold, and that’s good — or bad.
Now that said, though it is a non-productive asset, over the course of history, gold has been viewed by many as a way to preserve wealth through periods of economic strife. And I think what the stock markets are certainly telling us this year is that we are in, or at least entering, a period of economic strife, I think, for reasons that have been well documented. So that’s the consensus that lives out there. And during these periods, money tends to flow to gold. So the demand has surged and the price has followed suit.
Nick: One of the other Buffett quotes I like on gold is “that gold is a way to go long [on] fear.” There’s certainly a lot of fear in the market, and lots of folks that would like to have that gold ballast in their portfolio. With that in mind, Iain, what is a TSX-traded gold investment that looks attractive to you today?
4 ways to invest in gold today
Iain Butler: Just off the top of my head, I can think of four different ways to invest in gold. You can buy the physical commodity. And you can do that a few different ways: You can actually buy the physical commodity, or there’s ETFs that help one do so. You can buy shares in companies that mine gold. You can buy shares in a company that owns and collects royalties from companies that mine gold, or you can buy shares in a company that helps companies physically mine the gold. So this is kind of a pick-and-axe angle. Personally, that’s my preference: to take to take that pick-and-axe approach. Find a service-oriented company that generates revenues and cash flows by having these gold-mining entities as their customers.
Major Drilling: A TSX gold stock to consider buying
The company that I know best along those lines, and one that we’ve recommended to our members, frankly, is a company by the name of Major Drilling (TSX:MDI).
As the name suggests, this is a company that provides contract drilling services to mining and exploration companies around the world. They’ve got a fleet of drills, and mining companies call them up and contract out these drills to come and either develop a resource for an exploration company or physically extract that commodity from the earth.
So there’s still definitely ties to the underlying commodity for Major Drilling. Their customers are the gold mining companies, which again are reliant on the commodity for their revenue base. But when times are good and when the price of the commodity is high, like it is today, those gold-producing companies do pretty darn well actually. It’s just the uncertainty around them that scares me a bit.
So them doing well should eventually trickle down into Major Drilling doing very well. Based on Major Drilling’s stock price, I don’t think that this is a widely known company. It’s done very well in past mining cycles, which is kind of why I have it on a shelf, and I’m ready to pull out in these situations. I think, though, it’s flying under the radar. So this is a good business. It doesn’t provide the direct commodity exposure, but it certainly provides some, and I think given some pretty robust financials from gold mining companies around the world, we’re going to start seeing Major Drilling stands in a good position to to benefit pretty significantly.
NicK: All right. That’s a gold company to have on your radar in this — for better or worse — very favorable environment for the gold commodity price. Iain, thanks for joining us for this edition of the Five-Minute Major. Hope to see you next time.
