The price of gold might just be heading higher again after a brief plunge over what I believe is a temporary breather, which is always healthy if the bull run is to last for a prolonged period of time. In any case, there are some notable bulls on gold that think US$5,000 per ounce could be on the way within the next 12–14 months. I think it’s entirely realistic that gold makes such a run, especially if we are, in fact, due for a painful stock market correction that perhaps takes the broad TSX index down more than 10%.
Of course, a bear market is always a possibility as well, and if it does happen to hit over the year ahead, my guess is that gold, a top-tier risk-off asset, could get a nice shot in the arm, as investors rush to play a bit of defence after bidding heavily on the AI trade for well over three years now.
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Don’t bet against gold
Personally, I think owning gold is less about timing flows from risk-on growth assets to risk-off safe haven plays, and more about playing both sides of the coin. On the one hand, stocks could keep gaining from here, and gold could stay in a rough spot. And on the other side, gold could shine as stocks lose their lustre, perhaps led by some sort of AI pullback. And let’s not forget about the possibility that stocks and gold rise together (likely) or fall together (possible but less likely, at least in my view).
At the end of the day, gold is a stable asset that can help your TFSA (Tax-Free Savings Account) or non-registered account shine brighter, regardless of the circumstances. So, instead of predicting one certain scenario, you should prepare and play all potential scenarios and be ready to handle each. Either way, I think gold’s dip is an opportunity that’s golden. And the miners might be the highest upside way to play a bounce in the shining yellow metal as investors consider the next move.
Barrick Gold
Barrick Gold (TSX: ABX) might not be a top performer in the gold-mining space, but I view it as a relative value bet that could make up ground as management enhances operations. Sure, there’s much work that needs to be done, but if operations can smoothen, I think there’s potential for shares of ABX to trade at much higher multiples.
Add the appreciation potential of gold prices and expansion opportunities, and I think Barrick stock may very well represent one of the best deals in all of the gold world today. The stock trades at 13.5 times forward price-to-earnings (P/E) with a huge 1.9% dividend yield. As Barrick changes its leadership team, it will be very interesting to see where the miner goes next from here.
Gold Fields
Gold Fields (NYSE: GFI) is another interesting miner that’s worth checking out while it’s off from its highs. In the latest quarter, costs moved lower as production marched higher. With steadily increasing production and ample efficiency gains potential, I view the name as another deep-value option while shares go for 11.9 times forward P/E.
It’s cheap, growing production, and could shine bright if gold prices do make a move to US$5,000 at some point next year. Even without a gold rally, I like the 2.2% yield and the potential for more dividend growth as gold stays strong. With a 0.62 beta, GFI shares are also less correlated to the market than ABX (0.80 beta), making it a steadier defensive holding for a long-term portfolio.
