Stock markets worldwide are going through a volatile period right now due to several macroeconomic factors weighing on the global economy. When investing in the stock market becomes uncertain, people tend to look for safer investments outside the market. Gold is the typical safe-haven asset people seek for this end.
Gold has been used as such for thousands of years because it is a tangible thing with value. While many investors still consider buying gold as a way to protect their capital, there might be a better way to go about it. You can still get exposure to rising gold prices without taking your money out of the market and losing the liquidity it offers. How? By investing in gold stocks.
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Why not buy gold?
Gold is a good asset to buy and hold to watch it grow in value over the years. However, the rare yellow metal’s only value is in its scarcity. Gold does not produce anything itself and just sits there. The only way to make a profit from holding gold is that its value increases when the time comes to sell it, compared to when you bought it.
Buying and holding the stock of companies with gold-related businesses can help you bank on gold’s rising prices while investing in something that can inherently grow in value over time. Here are two TSX gold stocks I would consider investing in for exposure to gold.
Gold stock #1
Barrick Gold (TSX: ABX) is an $86.95 billion market-cap mining company that primarily engages in producing and selling gold, copper, and other precious metals. It is one of the biggest gold stocks trading on the TSX. The gold stock has seen its share prices rally for most of the year. As of this writing, the stock trades for $51.53 per share, down by just 5.15% from its 52-week high.
The gold producer recently released its third-quarter earnings for the fiscal year, reporting significant improvements due to rising gold prices. Gold prices at the start of the year were around US$2,600 per ounce, but have inched closer to US$42,000 per ounce at the time of this writing. The significant increase in profit margins has translated to the rally among gold stocks we are seeing today.
Gold stock #2
Wheaton Precious Metals Corp. (TSX: WPM) is another major player in the mining industry. The $63.52 billion market-cap company is one of the largest precious metals streaming companies worldwide. Unlike traditional mining stocks, the company does not own or manage mining operations itself. Instead, it offers a lower-risk exposure to gold and other precious metals through a streaming model.
The company provides capital to mining companies upfront in exchange for the right to buy produce at fixed, ultra-low prices when production begins. It has a mixture of long-term contracts and extreme capital efficiency. These are factors that make it an attractive investment to consider. As of this writing, WPM stock trades for $139.91 per share.
Foolish takeaway
Physical gold will not pay you any dividends, but gold stocks can. Besides that, you can quickly trade in your holdings in a gold stock for cash, while it can take a lot longer when you want to sell physical gold. These two TSX stocks sell gold for profit. When prices rise, margins expand, letting the companies deliver greater value to shareholders. To this end, Barrick stock and WPM stock can be excellent holdings to consider.
