Should Investors Buy Gold Stocks Now?
Gold stocks have been investors’ favorites lately. No doubt, the year 2020 is certainly the year of the golden bull. Just because the gold price has taken a slight dip recently doesn’t mean we’ve come to the end of the road with gold. As you may or may not know, Warren Buffett’s Berkshire Hathaway (BRK.A Stock Report) added Barrick Gold Corporation (GOLD Stock Report) to its portfolio in the second quarter, sending shares of the world’s second-largest miner surging. If you have been following Buffett, you would know that he isn’t usually a big fan of gold. This sends a signal to the market.
The price of gold, like so many other assets, fluctuates based on supply and demand. Typically, investors pour their money into the yellow-metal when they are unconfident about traditional assets such as property, cash, bonds, or equities. So, here we are, 9 months into the pandemic, stimulus after stimulus, fresh liquidity keeps flowing into global financial markets. Makes money cheaper than they already were after global quantitative easing in the past decade. For this reason, many investors turn to gold to hedge against their assets tanking in value should a crash happen again.
Can Gold Stocks Rally This Week?
Yes, we see consolidation for gold prices, but it’s a reasonable consolidation if you ask me. Is $1,900 the right price for gold? Investors might want to be more cautious when the pull-back is drastic. As far as I’m concerned, the recent drop in gold prices doesn’t look like a major panic sell. It could just be the early buyers taking some profit. In light of the recent surge in numerous metals, this could signal the bullish momentum among precious metals could be just about to begin. Some analysts also believe that the $3,000 level is possible at the end of this year. Of course, analysts could be wrong. But they also have the chance of being right. With Buffett’s recent acquisition of Barrick Gold, investors might want to follow suit and buy top gold stocks in the stock market today.
Top Gold Stocks To Buy Now [Or Sell]: Newmont Gold Corporation
First, up the list, Newmont Gold Corporation (NEM Stock Report) is one of the top gold stocks to watch. After the merger between Newmont Corp and GoldCorp, this is the largest gold miner in the market. The company released its quarterly earnings on July 30. The company’s attributable gold production sank 20.8% year over year to 1.255 Au million ounces in the second quarter.
The low production from the second quarter was simply due to the fact that five of its operations were placed in care and maintenance. But investors shouldn’t be discouraged, now that the gold price is hovering above $1,900 level, the third-quarter results should be unusually high, and revenue should also be much higher, assuming the gold price stays around this level or higher.
“Newmont continues to manage through the COVID pandemic from a position of strength and our diverse balanced portfolio of world-class assets provide stable production with significant reach to rising gold prices.”- Tom Palmer, CEO of Newmont Gold Corp.
Top Gold Stocks To Buy Now [Or Sell]: Royal Gold
The gold industry is usually separated into miners, refiners, and then the retailers. And when people want to get exposure to gold, gold miners are usually what comes to mind first. Investors who prefer a more conservative approach to invest in gold might want to consider Royal Gold (RGLD Stock Report). The company provides upfront capital to mining companies. In return, it secures the right to purchase a certain amount of gold, or other precious metals, at a discount. This way, Royal Gold retains the ability to benefit if the prices of gold increase, while at the same time not undertaking the risk of operating the assets.
The company posted a strong fiscal year in June and has outperformed on several metrics. Royal Gold reported full-year revenue of $499 million, which is 18% higher than the $423 million in the previous financial year. Earnings and cash flow also increased. Earnings per share were $3.03, and operating cash flow was $341 million. Perhaps what is more impressive is the balance sheet which has grown stronger.
The company paid down $115 million in debt, resulting in a net cash position of $18.7 million. That’s a good position to be in, with the uncertainty of the pandemic still hanging like dark clouds.