Gold prices just keep finding new ways to climb even higher, even after another extravagant year of gains. With a potentially looming U.S. government shutdown nudging the price of gold (and silver) even higher on Monday’s session, it seems like a bit too late in the game to be chasing the red-hot gold trade. Indeed, even a risk-off asset, like gold, can be risky if investors start momentum chasing. At the end of the day, I think gold is one of those assets that one should keep to average into over extended periods of time. Of course, the right allocation will differ for everyone.
Some might prefer having close to 5% of their net worth in the shiny yellow metal, while most others would rather leave it to less than 1%, perhaps with a gold coin or two in one’s safety deposit box. Personally, I like an allocation in the 2-8% range. Either way, I think the case for continuing to stick with gold is a bright one, even as some technicians see a greater chance of a near-term pullback. Given macro headwinds, fears, and unknowns fuel continued appreciation in the price of gold, it’s really hard to time the next correction.
For now, a looming shutdown, tariffs, and pressure on the U.S. dollar going into year’s end might be enough to keep the gold trade alive and well. For investors who don’t quite have enough gold at the core of their portfolios, the miners still look attractively valued, even though some of them have more than doubled over the past year. In this piece, I’ll go over some interesting gold mining plays worth buying for those who still want to go for gold, as it makes new records going into the fourth quarter.
Source: Getty Images
iShares S&P/TSX Global Gold Index ETF
For most beginner investors, a gold exchange-traded fund (ETF) such as iShares S&P/TSX Global Gold Index ETF (TSX:XGD) is a cost-effective way to bet on the broad basket of high-quality gold miners. Indeed, going with something like the XGD keeps things simple and cost-effective (0.60% management expense ratio).
Underneath the hood of the top Canadian gold mining ETF are some of the premier names in the space. Agnico Eagle Mines (TSX:AEM), which is one of my favourite precious metal miners currently, is one of the top holdings, currently comprising less than 15% of overall assets. Digging deeper into the XGD and you’ll find great TSX-listed and foreign gold miners that stand to amplify the moves in the price of gold.
Year to date, the XGD has not only beaten the TSX Index and S&P 500 by a wide margin, but it’s more than doubled, gaining an incredible 108%. Despite the parabolic run, the price-to-earnings (P/E) multiples of many miners aren’t elevated enough to dismiss the meteoric rise as some inflation of a bubble. If gold keeps rising hand-in-hand with production, the miners might still have more impressive years left in the tank.
Agnico Eagle Mines
For those who’d rather go with an individual name, you can’t go wrong with Agnico Eagle. The stock is up 97% year to date and trades at 28.4 times trailing P/E. With an above-average 0.97% dividend yield and recent stake sales in various mining operations, I’m a fan of the trajectory as gold prices look to punch even higher as Agnico keeps production upbeat while maintaining the health of its balance sheet. At this pace, I expect big things (dividend raises, too) from one of the go-to firms in gold mining.
