In this dynamic financial landscape, gold continues to be a crucial asset, recognized for its timeless value and appeal. As an investment, it offers a refuge during turbulent economic times, and owning gold stocks can offer a unique way to capitalize on this precious commodity.
In this article, we delve into the world of gold stocks, exploring the landscape of some of the most noteworthy gold mining companies in the market today. We also shed light on their performance, opportunities, and potential risks involved in investing in them. Whether you're an established investor or just beginning your journey in the world of gold stocks, this guide serves to better inform your investment decisions.
What is Gold Stock?
Gold stock refers to the shares of companies engaged in the exploration, mining, and production of gold. These companies derive their value from the business activities associated with gold, rather than gold itself. When an investor purchases a gold stock, they're essentially buying a stake in the company, not the physical commodity.
These stocks can offer several advantages over owning physical gold, including liquidity, dividends, and leverage. This means that if the price of gold rises, the profits of the gold mining company could increase at a higher percentage rate. Therefore, buying gold stocks can serve as a way for investors to gain exposure to the price movements of gold, while also potentially earning a profit from the company's operations. However, investing in gold stocks also carries risks, including those related to the company's performance and broader market volatility.
Gold Stock Market Sentiment
Gold is one of the most highly valued commodities in the world, and investors, analysts, and traders closely monitor its price. In 2022, gold prices declined, and sentiment turned negative. Opinion began to shift at the end of the year, and gold enjoyed a significant rally against all major currencies.
Today, sentiment toward gold remains mixed. Speculators are quick to take profits, and doubts linger in the market.
Nevertheless, market strategist Ronald-Peter Stoeferle, the managing partner at Incrementum AG, believes that now is an ideal time to establish a strategic position in gold to await future profitability. In a recent interview with Kitco News, Stoeferle explained that although gold prices might decline in the short term, the long-term outlook is favorable.
Furthermore, analysts agree that gold stocks can be a great addition to a diversified investment portfolio.
While physical gold ownership can be expensive and complicated, buying gold stocks is an easy way for individual investors to get the exposure they need.
Gold Stocks Worth Considering in 2023
Here is a selection of gold mining stocks worth considering this year.
Barrick Gold Corp
Agnico Eagle Mines Ltd.
Wheaton Precious Metals Corp.
Royal Gold, Inc
And here's a short overview of some of them.
Barrick Gold Corp
In 2022, Barrick Gold (NYSE: GOLD) (TSX: ABX) returned a record $1.6bn to its shareholders through dividends and share buybacks. Additionally, Moody's raised the company's long-term corporate credit rating from Baa1 to A3. Its 2022 results and Q4 performance showed increased copper resources and gold reserves through organic growth and exploration.
Graham Shuttleworth, the Chief Financial Officer and Senior Executive Vice President said:
On the back of the company's continuing strong operating performance, through the combination of the performance dividend policy and share buyback program, we have once again provided shareholders with record annual returns,
The company's operations in Cortez, Carlin, Pueblo Viejo, and Tongon, among others, had a strong Q4 performance while drilling across Barrick's portfolio confirmed significant growth potential in various areas. The company is also developing the massive Reko Diq copper-gold project in Pakistan and expanding Pueblo Viejo's process plant.
President and chief executive Mark Bristow believes the case for investment in Barrick is becoming increasingly compelling due to its proven strategy, global expertise, and significant resources.
Newmont Corp (NYSE: NEM)
Newmont (NYSE: NEM), another world-leading gold mining company, saw its gold mineral reserves grow from 92.8 million ounces at the end of 2021 to 96.1 million ounces in 2022. The reserve base has over 90% of gold reserves in top-tier jurisdictions and a gold reserve life of more than ten years.
Newmont also has significant exposure to copper, with 15.7 billion pounds in reserves along with other metals, including silver, lead and zinc.
The company's exceptional collection of assets, opportunities, and personnel is centered in favorable mining jurisdictions, including North America, South America, Australia, and Africa.
Newmont is recognized as the sole gold producer listed in the S&P 500 Index and is well-known for its conscientious environmental, social, and governance practices.
Franco-Nevada Corp (TSX: FNV), a leading gold royalty and streaming company, has been reporting strong financial performance, with revenues increasing Y/Y since 2018. Despite declines in precious metal prices, the company's diversified portfolio was able to partially offset these losses with strong oil and gas prices. The company earned record gold equivalent ounces (GEOs), revenue, net income, Adjusted Net Income, and Adjusted EBITDA for the first three quarters of 2022 and remains on track to meet full-year guidance.
Portfolio additions include the acquisition of a 2% NSR on Argonaut Gold Inc.'s construction-stage Magino gold project located in Ontario, Canada, for a purchase price of $52.5m and a private placement of $10m (C$13.6m) with Argonaut. Argonaut reported that the project's construction is approximately 70% complete as of September 30, 2022, with the first gold pour expected in April 2023.
The company's P/E is 36, and it offers shareholders a 0.9% dividend yield.
Wheaton Precious Metals Corp
Wheaton Precious Metals (TSX: WPM), a leading precious metals streaming company, achieved solid production results in 2022, meeting the low end of its revised guidance, despite facing several challenges. The company's President and CEO, Randy Smallwood, highlighted Wheaton's efforts to optimize its portfolio and ensure its readiness for prolonged growth.
Wheaton also diversified its asset base in 2022 by adding four new streams on development assets, contributing to steady organic growth over the next five years. Wheaton's strong reserve and resource base enables the company to present ten-year production guidance, highlighting the long-term strength of its portfolio.
In 2022, gold equivalent production met the low end of the revised guidance, primarily due to higher-than-expected production at Antamina, offset by weaker production from Salobo and Stillwater.
In 2023, gold equivalent production is forecast to be slightly higher than in 2022, as stronger production from Salobo and Constancia is expected to offset weaker production from Antamina and the termination of the silver stream on Yauliyacu.
Wheaton terminated its silver stream on the Yauliyacu Mine in Peru in August 2022 for a cash payment of $132m from Glencore to help facilitate the sale of the mine.
Over the next five years, average forecast production is expected to increase due to continued production growth from Salobo, Stillwater, Constancia, Voisey's Bay, Marmato, and incremental production ounces from other projects.
Wheaton's business model offers investors leverage to commodity prices and exploration upside with a lower risk profile than traditional mining companies, as the company delivers among the highest cash operating margins in the mining industry.
Agnico Eagle Mines Ltd
Agnico Eagle Mines Ltd (NYSE: AEM) (TSE: AEM) is a well-established Canadian gold mining company that extracts precious metals from various locations worldwide. Its mining operations are located in Canada, Australia, Finland, and Mexico, while it also has exploration and development projects in the United States.
The company is highly regarded within the mining industry for its ESG practices and is a sought-after partner.
Since its founding in 1957, the company has remained dedicated to creating value for its shareholders. It has been declaring a cash dividend every year since 1983.
Agnico Eagle's pipeline of exploration and development projects is of exceptional quality, promising exciting prospects for the future. The company's commitment to excellence in all areas of its operations ensures that it will continue to be a significant player in the mining industry for years to come.
Indeed, Agnico Eagle Mines Limited is acquiring Canadian assets of Yamana Gold Inc. as part of a plan of arrangement under the Canada Business Corporations Act. Following this acquisition, Pan American Silver Corp. will acquire all the outstanding common shares of Yamana.
Kinross Gold Corp
Kinross Gold (NYSE: KGC) (TSX: K) has released its results for Q4 and the full year ending December 31, 2022. Its Russian and Ghanaian assets have been excluded from the results, as they have been classified as discontinued.
Kinross has disappointed investors with underperformance and poor results in recent years. It may have bitten off more than it can chew with its purchase of Great Bear, leading to a suppressed share price. However, if the price of gold rises, this stock is likely to benefit. It may also be considered an acquisition target by bigger players in the sector.
In 2022, the company returned $455m in capital to shareholders through dividends and its enhanced share buyback program. Kinross expects to continue its dividend and share buyback programs in 2023 and 2024.
Kinross is a senior gold mining company that operates globally and is based in Canada. It has projects and operations in various countries, including the United States, Brazil, Mauritania, Chile, and Canada.
Gold Price Volatility
During the financial crisis of 2007/2008, investors sought safer investments like gold, causing its price to rise. This benefited commodity-based businesses as the value of their products increased. Following the crisis, the price of gold experienced a significant increase. Although it declined between 2012 and 2018, it started to climb again due to growing economic uncertainty and geopolitical tensions.
In the past, when economies recovered and investors took more risks, the price of gold would decrease, causing miners to lose value because the material they produce becomes less valuable. However, in 2020, something unusual happened: the US stock market experienced a remarkable rally, while the price of gold soared at the same time.
China's economic slowdown has had a negative impact on commodity prices, leading to a decline in the popularity of mining companies. China has a significant influence on commodity prices, so when positive economic data is released from China, the stock prices of mining companies tend to rise.
What is the Gold Outlook According to Market Analysts?
Analysts at BMO Capital Markets believe that gold's brief surge above $2,000 per ounce in mid-May may have been its peak for the year. They maintain their year-end average gold price target at $1,905 per ounce but caution that gold is losing momentum and struggling to sustain gains above $2,000. Factors such as climbing treasury yields, a strong dollar, the potential impact of rate hikes, and geopolitical risks are contributing to gold's uncertain direction. While they anticipate support for gold prices in the third quarter due to uncertainty and macro headwinds, they expect gold to lose some appeal as central bank rate trends become clearer and the risk of a "hard landing" diminishes by the end of the year.
Meanwhile, Goldman Sachs believes that "fear" is the primary driver of gold prices in the medium to short term. As uncertainty increases, investors tend to prefer holding more gold in their portfolios, leading to higher prices. Their research indicates that fear has a more significant impact on gold investment demand than the opportunity cost of holding gold, measured by short-term US rates. The recent rise in fear has been triggered by banking and funding stress, reminiscent of the conditions seen in March 2020, as well as a notable increase in the market's expectation of a US recession within the next year.
Why not delve deeper into the world of gold investments?
Discover the benefits of investing in gold as a hedge during uncertain times, and learn how it can diversify your portfolio and provide protection against inflationary pressures. As you consider whether gold is a good investment in 2023, don't hesitate to expand your investing education by exploring our other insightful articles, such as How to Buy OTC Stocks, How to Buy TSX Stocks, and How to Find Investment Opportunities.