5 gold stocks to watch
Trading or investing in gold stocks or gold ETFs can be a great way to gain exposure to the gold market. This is why we've created a list of five of the most popular gold stocks to watch.
What’s the outlook for gold markets and gold stocks?
In 2020, the gold market was one of the few sectors that seemed to rise as a result of the Covid-19 pandemic. In fact, as the number of coronavirus cases continued to increase, gold hit $2068 per ounce in August, which was its highest price level since 2011.
This is because gold is typically seen as a safe haven in times of financial crisis, so investors use it as a hedge against inflation. It’s worth noting that this relationship is not set in stone, especially as investors may turn to other asset classes as a safe haven – such as the US dollar, Japanese Yen and silver. So, if global markets crash, there is always the possibility that the gold market and gold stocks could fall as well.
However, it seems that throughout 2020, gold was still the safe haven of choice as it responded heavily to any positive news that hit the market. Gold stocks fell on 4 November following the US election, as the Republican party seemed to retain a hold on to the Senate, which could block President-elect Joe Biden's expansionary fiscal plans.
Gold stocks fell again on 9 November, as the gold price fell close to a four-month low, after Pfizer announced their coronavirus vaccine had a 95% effectiveness rating. The news provided a glimpse at the end of the pandemic, which could have caused investors to feel comfortable leaving the safe-haven asset behind.
Regardless of how the gold price is fairing, there will always be some top gold stocks that can be worth looking at – either for going long, or short.
Top 5 gold stocks to watch
- Barrick Gold Corp (GOLD) – $43.21 billion
- Agnico Eagle Mines (AEM) – $16.45 billion
- Eldorado Gold Corp (EGO) – $2.09 billion
- Sandstorm Gold Ltd (SSL) – $1.37 billion
- Jaguar Mining Inc (JAG) – $433.38 billion
When you trade gold stocks, you can gain exposure to every element of the industry – from mining to funding. Take a look at five gold stocks to watch – whether you’re looking for growth potential, stable returns or just volatility over the short term.1
Barrick Gold Corp (ABX)
Barrick Gold Corp (ABX) is one of the largest companies in the gold mining industry – both in terms of its operating size and amount of gold produced. It’s also among the world’s largest publicly traded copper producers.
Barrick was one of the many gold stocks that experienced considerable momentum throughout 2020 as a result of the increasing gold price. It had a positive third quarter (Q3), as it reported better-than-expected earnings on 5 November. The Canadian mining giant recorded total sales of $3540 million, which was an increase of 32.2% year-on-year. As well as earnings of $726 million, which is $0.41 per share – this marks an increase of 78% from last year, and was ahead of the earnings per share (EPS) expectations of £0.33.
One of the driving forces behind such a great earnings, was that Barrick finally struck an agreement in principle over the Porgera gold mine in Papua New Guinea (PNG). Previously, the government had rejected the company’s request to continue its lease of the site, but in October, the Prime Minister of PNG announced it could be reopened. Further growth potential could be found in Barrick Gold’s new collaboration with Newmont Goldcorp to explore eight assets in Nevada.
It may come as a surprise then that Warren Buffet ‘s company Berkshire Hathaway actually sold 40% of its stake in Barrick Gold less than a year after owning it. This could largely be due to the expectation that the Covid-19 vaccine could cut gold demand.
In late November 2020, Barrick Gold was trading at $23.39, which actually pushed the stock into oversold territory using the relative strength index (RSI) – falling below the 30 level to 29.4.
Agnico Eagle Mines (AEM)
Agnico Eagle Mines (AEM) is a Canada-based gold exploration and production company, which has operations across Canada, Europe, Latin America and the US.
Agnico Eagle stock declined by 12% between October and November 2020. This is surprising given that by most popular metrics, AEM has considerable growth potential over the long term. For example, it’s return on equity (ROE) is approximately 12.2%, which is similar to the average of the gold sector – 9%.
This is probably due to the negative impact of Covid-19 on the company’s operational activities in the first two quarters of 2020. However, by its Q3, AEM’s overall output had returned to levels last seen in its Q4 2019.
This high rate of return has caused the company to see substantial growth in its earnings. In its Q3, AEM reported a profit of $567.81 million and revenues increase to $980.61 million. Management also announced it’s on course to hit an annual production run rate of 2 million ounces a year in 2021.
In September 2020, Agnico Eagle announced a joint venture with Newmont to explore new projects in Colombia. A new source of output could lead to further growth for the firm over the coming years.
Eldorado Gold Corp (EGO)
Eldorado Gold Corp (EGO) is a Canada-based gold mining company with operations in Europe, Asia and the Americas.
EGO stock has increased by 51.53% over the last 12 months, largely due to a production increase of 35% – up to 136,922 ounces in Q3 2020 from 101,596 ounces in Q3 2019. The higher production rate was need to keep up with demand for gold, which pushed up the gold price and increased EGO’s net cash up to $165.4 million in Q3, from just $51.2 million the year before.
Eldorado Gold also reported net earnings of $41.0 million or $0.24 per share – which was up from $4.2 million, or $0.03 per share in 2019.
However, in November 2020, EGO reported a short-term reduction in operations caused by limited workforce availability due to Covid-19. Depending on the ability of Eldorado to input health and safety measures at its facilities, and the speed of a global vaccine, this could be an ongoing issue for the company.
Sandstorm Gold Ltd
Sandstorm Gold (SSE) is a metal royalties company – it owns the rights to buy gold and other metals from mining companies and development projects.
A number of Sandstorm’s assets had to temporarily halt operations amid Covid-19, but it’s since clawed back some of its resulting losses. It produced just 12,000 ounces of gold in Q3 2020, but it’s output growth was much stronger than other companies. The firm posted revenues of $23.3 million for Q3 2020, compared with $25.8 million for the same period in 2019.
Although Sandstorm Gold hasn’t had as impressive of a year as some of the pure-mining gold stocks, it’s achieved moderate returns – which considering the state of the wider resource market, is bolstering investors. The company’s high over the last year is $10.63 and the low is $3.32 – as of 24 November, most analyst ratings come in between $6.35 to $10.94. The huge range is consistent with the mixed opinions of the stock and it’s future performance.
Sandstorm is on track to see further growth once its operations return to normal post-pandemic, therefore, it’s important to keep an eye on the company and its wider sector for indicators of future performance.
Jaguar Mining Inc
Jaguar Mining (JJG) is a Canada-listed gold production, development, and exploration company operating in the Iron Quadrangle – a greenstone belt located in Minas Gerais, Brazil.
Jaguar has had a year of strong growth and accelerating earnings. In Q3 2020 it announced that production was up by 25% with 24,094 ounces produced compared to 19,324 ounces produced in Q3 2019. Jaguar also announced its intentions to continue to expand its exploration operations, with over $1 million in further investment.
Thanks to this higher rate of production and an increase in the gold price, Jaguar reported a profit increase of 355% to $25.8 million compared to $5.7 million in Q3 2019.
Covid-19 remains the key risk to the company in terms of maintaining this growth momentum, as cases in Brazil have been on the increase and Jaguar itself has now experienced its first few cases within its staff. Jaguar’s management remain optimistic that its production performance, a weaker Brazilian Real and improving prices for gold will continue to boost the company’s performance.
Another key risk for Jaguar is the lifespan of one of its main mines, called Pilar – its estimated that it has barely four years of mine life left assuming no reserves are added. The Pilar mine accounts for 24% of Jaguar’s gold production in Q3 2020.
An alternative way to gain exposure to gold stocks is to trade gold exchange traded funds (ETFs). There are a variety of options to look at when you’re deciding on the best gold ETF for you, as different funds will have different functions, costs and offerings.
There are some funds that buy and hold gold bullion. For example, GraniteShares Gold Trust ETF is designed to track the performance of the price of gold, through its holdings of gold bullion are in secure vaults in London. Trading GraniteShares Gold Trust can be a great way to get exposure to bullion without trading the precious metal itself, but it is extremely sensitive to the price of gold. Similar gold-based ETFs include ETFS Physical Swiss Gold Shares ETF, iShares Gold Trust and SPDR Gold Shares.
Alternatively, you could look at equity-based ETFs that track companies involved in the mining and production of gold. For example, the Sprott Gold Miners ETF consists of a basket of over 25 gold and silver mining stocks that trade on US exchanges. Similar equity-based gold ETFs include VanEck Vectors Gold Miners ETF and iShares MSCI Global Gold Miners ETF.
Are gold stocks a good investment?
Broadly speaking, gold stocks come with the same risks as investing in many other stocks. If you are looking for growth potential, then there are some great opportunities in the market. But as with any industry, there is also the potential for low revenues and disruptions to the supply chain, which can affect share prices.
Despite this, a lot of people view gold stocks as a great alternative to investing in the precious metal itself. The share prices of gold mining and production companies don’t necessarily respond as quickly to changes to the value of gold, which means they can be a good way to hedge exposure to gold prices. There are even those who believe that gold stocks have the potential to outperform gold itself.
Instead of investing, you could trade gold stocks. You’d be speculating on the underlying price of the company’s shares, rather than taking ownership of the stocks themselves.
When you use derivatives, such as spread bets and CFDs, you can go long and short. So, you can take a position on declining market prices, as well as being able to mimic the traditional ‘buy’ position that you take when you invest. Especially given the volatile nature of the gold market, being able to go short provides a range of opportunities for traders.
How to start trading gold stocks
- Invest in gold stocks or ETFs by opening a share dealing account with us
- Start trading CFDs or spread betting on the price of gold stocks and ETFs by opening a live account with us
- Build your confidence in a risk-free environment by opening a demo account
Alternatively, if you don’t feel ready to start trading in any form, you can continue to learn more with IG Academy’s range of online courses.
1 Data collected on 24 November 2020
This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.
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