Investors who haven’t been living under a rock will know that gold is now (finally) a fashionable investment again. The price of the yellow precious metal has continued to soar, hovering right around all-time highs at the time of writing.
This move in gold prices does appear to be directly tied to concerns around the stability of the overall global banking system, as rising deficits and demand for Treasuries could become an issue, especially given how strong certain currencies are. And with gold priced in U.S. dollars, big swings in the currency markets can be very meaningful for investors, particularly over the short term.
In this article, I’m going to highlight two top Canadian gold mining stocks that are up more than 15% over the past two months at the time of writing. Let’s dive into what drove this rally and whether it can continue.
Agnico Eagle Mines
One of my top Canadian gold producers, if not my favourite, is Agnico Eagle Mines (TSX:AEM).
I initially began following this stock when it was known as Kirkland Lake Gold, which was dissolved in a mega-merger resulting in Agnico becoming the second-largest gold miner in the world by market capitalization.
However, since then, shares of the combined entity have absolutely taken off. Indeed, it should be no surprise that rising gold prices resulted in such a move, given the operating leverage Agnico Eagle provides investors to the price of gold, as well as the high-quality (and high-volume) mines this company operates.
With operations in mining-friendly jurisdictions around the world, and plenty of upside to current gold prices given the company’s valuation of just 24 times trailing earnings (with a 1.1% dividend yield), this is a no-brainer stock in this sector, I think, that can continue to run from here.
Wheaton Precious Metals
The fourth-largest gold miner by market cap in the overall market, Wheaton Precious Metals (TSX:WPM) is no slouch in its own right.
Shares of the precious metals streaming company have very similar characteristics to those of Agnico Eagle. The key difference is in how Wheaton Precious Metals generates its revenue (via up-front capital investments in miners in exchange for the right to purchase a fixed percentage of gold at below spot rates).
This model is one that has paid out incredibly well for investors in a surging gold price environment.
Of course, the question is whether this momentum can be sustained. But given the strength of Wheaton’s past contracts and its current highly profitable model, this is a gold mining-related name that certainly deserves a valuation premium.
At more than 58 times earnings, that’s certainly the case. My view is that Agnico Eagle probably is the best bet for most gold enthusiasts and investors looking to take advantage of this rally right now, given the risk associated with Wheaton’s business model (if gold prices come down in a significant way). But for those looking for a more aggressive way to play precious metals, have a look at WPM stock – it has been a top performer for a reason.
