Investors tend to buy gold stocks as a hedge against broad economic fear. Markets remain volatile and fears of a recession or worse remain elevated. Those are the exact conditions that have historically made gold shares a good investment. Gold tends to underperform the broader stock market in the long term but outperforms in conditions like those we are currently experiencing.
Some people like to invest in physical gold for the sense of security its tangibility provides. We’ll be talking instead about miners and streaming royalties firms. Miners pull the gold out of the ground and royalties firms provide the funds for some of those firms to do so. Placing your funds behind the firms that successfully do so in volatile times results in steep returns.
So here are the best gold stocks to buy.
Dundee Precious Metals (DPMLF)
Dundee Precious Metals (OTCMKTS:DPMLF) is a Canadian gold exploration firm that’s technically a penny stock as it trades for less than $10. In fact, it trades for $6.40 and is well-regarded by the analysts that cover it. They anticipate it will grow by roughly 50% which is reason enough to consider it.
Dundee Precious Metals mines gold in eastern Europe and extracts the gold from ore in Namibia. It is also developing projects in Ecuador and Serbia. The company posted results on Oct. 10 and achieved record results which had been expected.
The record results allowed the firm to reaffirm previous production guidance. That should go a long way for investors. Dundee Precious Metals shares continue to hold strong upside due to strong guidance and the inherent price upside of gold. As long as the company can deliver the goods, its shares will continue to hold the same promise of rapid returns for investors. That’s precisely what they offer at the moment. This makes it one of those gold stocks to buy.
Royal Gold (RGLD)
Royal Gold (NASDAQ:RGLD) stock is an investment in gold streams and royalties. The company buys the rights to stream and royalty interests. What that means is Royal Gold buys the right to buy a portion of production at a certain price over a determined period for a fee. When prices rise higher than expected, Royal Gold makes a lot of money on the difference. Royalties provide the rights to revenues or gold produced from a given investment.
Miners producer and royalty/streaming firms finance. Both do well in times like now. RGLD offers a share price upside, a dividend, and royalty/streaming income.
Royal Gold’s performance has essentially been flat over the last year. That’s not a bad thing. The company’s revenues, net income, and earnings have been very steady. That doesn’t mean share prices have been flat. Instead, they’ve moved up and down with economic fears. The positive news there is that they’ve basically trended upward throughout October after prices fell for months since May. That’s a decent reason to assume it can run higher.
Franco-Nevada (FNV)
Franco-Nevada (NYSE:FNV) is, like Royal Gold, a streaming and royalties stock. Such firms are attractive to investors because they transfer some of the risk to the mining firms in which they invest.
What’s particularly attractive about Franco-Nevada is how well-funded the firm is currently. Franco-Nevada is debt-free and cash-rich. The firm has $2.3 billion in available capital per its June 30 earnings report. In other words, Franco-Nevada has a chance to really capture massive positive returns right now.
The company is in an enviable position in which it can deploy that capital strategically. That’s the bet investors are going to have to be willing to make at the moment. In general, gold investors like to look at solvency ratios, which simply measure their ability to meet obligations. Franco-Nevada has fewer obligations due to its lack of debt. That makes it much less risky than other gold firms that generally carry high debt. All in all, it’s one of those gold stocks to consider.
Franco-Nevada has historically created value, meaning its return on invested capital outweighs its cost of capital. It all speaks to the idea that FNV shares are strong.
Newmont (NEM)
Newmont (NYSE:NEM) produced more gold than any other mining firm globally in 2022. Investors who choose stocks that lead strong sectors often do very well. Newmont is among the biggest names in gold, and as it strengthens, Newmont will be among the biggest winners.
In May, Newmont agreed to purchase Newcrest, an Australian gold and copper miner, for $17.5 billion. Then, a few days ago, on Oct. 11, shareholders overwhelmingly approved the acquisition. The acquisition of Newcrest is the largest-ever deal in the space. Newmont appears to be rapidly strengthening as the markets continue to tilt in favor of gold overall.
Expectations around the deal are impressive. It’s expected to produce $2 billion of cash improvements over 2 years and produce $500 million in pre-tax value.
Newmont also strengthened its position in copper production as a result of the transaction. Copper is the most conductive metal, which makes it especially valuable in electronics. Secular trends suggest growth as increased connectivity is paramount for the foreseeable future.
Barrick Gold (GOLD)
Barrick Gold (NYSE:GOLD) is one of the best bets to provide the safety gold stock investors often seek.
Barrick Gold boasts the largest portfolio of Tier One gold assets of any company in the world. Tier One gold assets refer to assets that exhibit a reserve potential to deliver a minimum 10-year life, annual production of at least 500,000 ounces of gold, and total cash costs per ounce over the mine life that are in the lower half of the industry cost curve. Low costs and high production potential are a strong mixture.
Barrick Gold has still fallen since May. And, like the rest of the gold sector, it has rebounded since the beginning of October.
The company released preliminary Q3 results that show higher gold production than anticipated. The firm also stated that it expects fourth-quarter production to increase significantly. Those factors should provide sufficient reason for investors to buy GOLD shares.
DRDGOLD (DRD)
DRDGOLD (NYSE:DRD) promises to provide investors with 33% returns based on average analyst targets. It trades for $9, and there are actually only 2 analysts covering DRDGOLD. One believes it’s worth $8, and the other believes it’s worth $17.
Mixed signals are coming from the company that I would characterize as being positive overall. Revenues increased by 7% due to a 16% increase in gold prices during the second quarter. The company was 180 ounces shy of its mid-range goal of 170,000 ounces of production in the quarter.
That allowed the firm to increase its dividend for the 16th consecutive quarter. Though DRD stock doesn’t receive a ton of coverage, it’s fair to assert that it’s relatively stable for those reasons. Further, the company increased its full-year guidance, which is always a good sign for investors. Overall, DRD shares look reasonably well-shielded while also having strong upside potential.
Osisko Gold Royalties (OR)
Osisko Gold Royalties (NYSE:OR) benefits from the same momentum spilling across gold stocks at the moment and is bolstered by strong preliminary deliveries. That’s part of the reason that the stock is so well-regarded, as it also offers significant upside, according to analysts.
Osisko earned 23,292 attributable gold equivalent ounces, or GEO in Q3. GEO includes silver, copper, and zinc ounces. This number is then converted to a gold equivalent based on a ratio of the average spot market price for the commodities each year. That all translated to preliminary revenues of $62.1 million in the third quarter and a record margin of $57.7 million during the period.
The firm’s cash to debt ratio improved by $5 million during the quarter even as it increased its royalties investments at the same time. Osisko Gold Royalties is performing well while continuing to head in the right direction at an opportune time. It’s therefore one of those gold stocks to buy.
On the date of publication, Alex Sirois did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.