Don’t look now, but gold seems to be off to the races again after a very brief October correction that happened well before the slippage in November AI stocks. Undoubtedly, now that things are looking higher for the price of gold, many investors may be wondering if now is a good time to pick up the metal as a hedge against potential chaos in the new year.
Just because stocks have shrugged off the AI pullback does not mean we won’t get another AI-focused wipeout in the tech sector, or worse, a miniature form of an AI bubble bust. Of course, there’s also a chance that the established, profitable AI innovators are still undervalued here if the AI dreams of many smart folks in tech do come true!
In any case, recent action suggests gold could be a safe haven from further tech-related volatility, which makes the asset shine pretty bright going into year-end!
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Can gold stocks add shine to your portfolio?
The important thing is to stay diversified and to insist on relative value. Though gold is tough to gauge, since its value depends on what someone else is willing to pay, I do think the latest past-month resilience and the newfound momentum make the asset worth owning as part of a portfolio looking to improve the overall risk/reward.
Now, not every investor wants to maximize their Sharpe ratios (a measure of risk-adjusted returns), but I do think that gold remains one of those assets that can provide insulation from volatility while also powering a good amount of returns over time. Year to date, gold – a typically risk-off asset – has soared more than 56%, putting the stock market indices to shame. If you’re willing to take on more risk and volatility, I think the miners are a great choice.
Barrick Gold: A dirt-cheap large-cap with potential catalysts
I think of names like Barrick Mining (TSX: ABX) and Orla Mining (TSX: OLA), two impressive miners that have plenty of tailwinds and really low price-to-earnings (P/E) multiples.
Moving ahead, a new CEO and some more massive managerial changes could pave the way for a new kind of Barrick, one that I believe is worth a big, fat premium. As the generational surge in gold prices hits, I think making a big change at the top is a good way to go to make the most of what may very well be a historic opportunity.
Of course, not every CEO transition goes smoothly, but I think there’s plenty of value to be unlocked in a $98 billion juggernaut whose shares trade at an absurdly cheap 13.6 times P/E. If you’re a fan of value and can keep your cool through the transitional moment, I think the name is tough to overlook if you seek bang for your buck.
As for Orla, it’s even cheaper, going for 10.7 times forward P/E despite gaining over 370% in two years. I think the mid-cap miner ($6.4 billion market cap) is worth picking up if you’re comfortable with betting on a smaller operator in the space. Undoubtedly, the ride will be choppier, but with the name on the radars of so few, I think the deep value option is a perfect buy as newfound momentum drives shares to new highs.
