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Best Gold Stocks To Buy In 2021

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Best Gold Stocks In 2021 | The How and Why of Investing in Gold Stocks

Investing in gold is considered to be a core strategy for many investors. Gold is considered a safe haven and a hedge against the volatility of the market. In general, when gold prices rise, it means investors are concerned about the value of currencies. This concern can be tied to monetary policy. For example gold prices soared in the aftermath of the financial crisis. The United States Federal Reserve Board (i.e. The Fed) began a program of quantitative easing that flooded the stock market with liquidity. While economists will debate the merits of this policy for decades, there’s no question that it devalued the U.S. dollar and caused gold to climb.

  • In fact, in September 2011, the spot price of gold soared to $1,900 an ounce. In the aftermath of the pandemic caused by the novel coronavirus, gold prices are approaching these record levels again. That is making gold once again one of the most practical investments you can make.
  • And in 2020, investing in gold has never been easier, but it does require some research. The most common way for investors to buy and sell gold is by buying the physical metal itself, usually in the form of gold coins. However, exchange-traded funds (ETFs) are becoming a popular alternative because they mirror the price movement of gold without the obstacles that can come from the cost (and peripheral obstacles like storing and insuring) associated with buying gold directly.

Introduction to investing in gold

Gold and other precious metals are widely considered to be a hedge against inflation. However, in volatile times like these investors look to gold because of its value. Simply put, the price of gold tends to rise when investors believe that the value of currency is going to fall.

  1. Gold can be purchased in many ways. One way is to purchase gold in its physical form. This is frequently done by buying gold coins, but it can also mean buying actual gold bullion.
  2. This approach has its drawbacks. Specifically gold can be expensive. At the time of this writing, an ounce of gold is trading for over $1,800 an ounce. That’s almost three times the price of one share of Tesla (NASDAQ:TSLA). Plus, physical gold also should be stored and insured. And taking possession of physical gold usually involves transaction fees of some sort.
  3. That’s why investing in gold stocks can be a desirable outcome. The purpose of this article is to give you an overview of how to invest in gold stocks. We’ll look at the different types of gold funds that exist, the factors you should consider when choosing gold stocks. We’ll also look at the pros and cons of trading gold on the futures market using options contracts.

How do you invest in gold stocks?

Investing in gold stocks is less expensive and offers more liquidity as a way to get involved with precious metals. However, gold does not exist as a company that you buy shares of. Instead when you hear the words “gold stocks” it means you are directly buying shares of a mining company such as Barrick Gold (NYSE:GOLD) or you are buying into a mutual fund or exchange-traded fund (ETF).

  • When you invest in a mining stock, you’re not investing directly into physical gold. And while it’s true that shares of a mining company should have a correlation to physical gold, the correlation is often a loose one. This is because mining companies have opportunities and challenges that are unique to their sector.
  • Also as corporations, they have an obligation to their shareholders. While this can sometimes affect capital growth, many mining stocks do pay a dividend which can make them a desirable addition to a value investor’s portfolio. For example Newmont Corporation (NYSE:NEM) pays a dividend yield of 2.74%.

Best gold stocks at this moment

Companies like Barrick Gold Corp. (GOLD), BHP Group Ltd. (BHP), Franco-Nevada Corp. (FNV), Gold Fields Ltd. (GFI), and Newmont Corp. (NEM) are profiting more off of the lucrative gold sector.

  1. Barrick Gold Corp.
  2. BHP Group Ltd.
  3. Franco-Nevada Corp.
  4. Gold Fields Ltd.
  5. Newmont Corp. 

1. Barrick Gold Corp. (GOLD)

Barrick Gold Corporation is one of the largest gold-specific miners on the market with a current value of $35 billion. It is located in Toronto and has ownership stakes in gold mines primarily in Africa and the United States.

Admittedly, the stock has not done well recently, with a 15% decline in GOLD stock over the last year against 30% gains for the S&P 500.

However, shares have been on a strong run in recent weeks, in part due to the prospect of higher inflation, so now may be a good time to consider adding a position in Barrick Gold.

2. BHP Group Ltd. (BHP)

BHP is the world’s largest mining firm by market capitalization, with operations in nearly every nation where raw materials may be extracted from the ground.

The company’s operations include oil and gas extraction, exploration, and development; its mining activities include copper, silver, zinc, molybdenum, uranium, and iron ore deposits.

BHP also mines gold, although it is a component of a more diversified portfolio. If you want to invest in pure gold and have no interest in the sector’s broader inflationary trends could rise – providing you extra opportunities to profit as well as protection against going all-in on just gold. If you’re looking to reduce your risk this could be a option.

3. Franco-Nevada Corp. (FNV)

FNV is a gold miner with a market value of around $30 billion that is neither so big it can run out of money nor so tiny it can’t capitalize on rising precious metals prices.

It produces silver and platinum, as well. However, it is a gold-focused firm, accounting for roughly 65 percent of revenue in its mining sector from the yellow metal alone. Besides that this company is also into harvesting oil and gas.

With that in mind, FNV Gold has said the company is expecting a lot of volatility over the next year, which means you’ll get some stability from the other business lines, but FNV is still prepared to ride a rise in gold prices straight through – and potentially more quickly than larger and more diversified rivals – making it a good choice for those bullish on the gold metal.

4. Gold Fields Ltd. (GFI)

The company behind the gold miner is Gold Fields Ltd., which has reserves in South America, Africa, and Australia. The business also explores for copper deposits but, as the name implies, it’s all about the gold.

GFI presently has investments in nine operating mines with a combined output of about 2.24 million ounces each year, or close to $4 billion at current prices.

And there’s no danger of those mines running out anytime soon, since it has an estimated reserve of about 116 million ounces. GFI is a gold miner with a long and promising future. Established in 1887, it is a company with a storied history and bright prospects.

5. Newmont Corp. ( NEM)

Newmont is a worldwide mining and metals company with interests in the United States, Australia, Chile, Peru, Tajikistan, and Tanzania and a market value of $45 billion

But because it derives much of its gold from mining operations in the United States, Canada, South America, Australia, and Africa, most of its copper, silver, zinc, and lead is produced as a byproduct.

At the end of 2020, it had 94.2 million ounces in proven gold reserves on about 36,600 square kilometers of territory across the world. Performance of gold stocks in general has been disappointing, but if you’re searching for one of the most well-known names in the business, NEM is certainly one of the best gold stocks to invest in now.

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How to Invest in Gold ETFs

Just how attractive has it become to invest in gold ETFs? According to Gold.org, in the first five months of 2020, investors bought into gold ETFs at a record pace. Through May 31, investors bought $33.7 billion worth of gold ETF shares.

Shares of an ETF can be bought and sold throughout the trading day just like shares of stock. This is a crucial difference between an ETF and a mutual fund. Since the price of gold can move rapidly in either direction (and sometimes it can make large moves), ETFs are becoming more attractive for investors.

  • There are many mutual funds and exchange-traded funds (ETFs) that move with the price of gold. When choosing to invest in gold stocks via an ETF or mutual fund, investors have options. One is to find a fund that invests in the metal itself. One such example is the SPDR Gold Shares ETF (NYSE:GLD). This fund is the oldest, and largest, physically backed gold exchange traded fund (ETF) in the world.
  • One share of the ETF is valued at one-tenth the spot price of gold. At the time of this writing that would be about $180.

The other option is to find a fund that invests in the stocks of physical gold as well as into gold mining companies. These funds may have price movement that is more volatile than an investment in the physical metal itself. Plus, mining companies are subject to geopolitical or environmental concerns that will not affect the cost of physical gold.

What Factors Should You Consider When Buying Gold Stocks?

As is the case when you buy any mutual fund or ETF you should pay attention to the expense ratio (i.e. the annual fee) charged by the fund. The average expense ratio for gold ETFs is approximately 0.65%. Another factor to consider is the five-year return of the ETF. This is particularly true if you are investing in a fund, such as the GOLD fund, that is tied directly to the physical metal. Roughly speaking the returns should approximate the movement of gold over that period.

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Gold Stocks and Options Trading

In recent years, more experienced investors are trading options on physical gold. This is because options trading is a way to, potentially, make a profit while putting less capital at risk.

Options trading means trading in gold futures. A futures contract is traded on an exchange. Buyers and sellers negotiate a specific quantity and price for gold at a specific date.

When you buy an option you are buying the right, although not the obligation, to buy or sell a specific equity at the option price. Essentially you’re betting on price action to occur in a specific direction. If you’re right, it can be very profitable. If you’re wrong, you’re simply out the premium you paid to buy the option.

Investors can choose to take a long or short position in gold

For those unfamiliar with options trading, a long position means an investor is buying gold with the expectation of gold prices rising. In this case, the investor is looking to buy gold at a lower price. By contrast a short position is taken when an investor is looking to sell gold in anticipation of price falling. In this case, the investor is selling gold but intends to cover it later at a lower price.

  • While this is a different process than buying shares directly, some investors find it to be a more efficient way to trade gold. ETFs come with management fees and taxes on capital gains. Plus regardless of if the fund is actively or passively managed, every ETF has a fund manager that makes decisions on the investor’s behalf.
  • By contrast, trading futures avoids all of that. And because most investors can use margin to trade, every $1 can represent up to $20 of physical gold.

Trading gold futures is often used as a hedging strategy against the volatility of the stock market or against a weak dollar. Trading gold using options is also a way for speculators to invest in gold without having to have physical gold in their possession.

The final word on investing in gold stocks

For many investors, precious metals are a constant in their portfolio. Others move in and out of gold and other metals as conditions warrant. That’s one reason why gold stocks can be an appealing option. Rather than hold the physical asset, investors can trade shares just like they do for other equities in their portfolio.

  • And if investors don’t want to trade in the options market, they can choose to invest in the security of an exchange-traded fund (EFT) or mutual fund. While these investments are not going to hold as much value for investors as holding the physical asset, they are a low cost way of maintaining a position in gold without the need to hold physical bullion.
  • However you decide to invest in gold, it’s important to understand that while gold is known as a true store of value, it can be volatile. Therefore investing in gold while not at a risk of going to zero does contain a level of risk that may be uncomfortable for risk-averse investors.
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Are gold stocks a good investment?

Because gold prices tend to be less volatile than stocks, gold is viewed as a comparatively safe investment. People use gold and other precious metals to diversify their portfolios and to serve as a hedge when other investments decline in value. There are numerous ways to invest in gold.

Is it better to buy gold or gold stocks?

If you’re looking for an investment that’s similar to current stocks in your portfolio, gold mining stocks are a better investment. They operate like regular stocks while giving you an opportunity to invest in the gold market.

Is gold worth investing in 2021?

Gold is one of the safest and most secure investment options available and also offers the potential for large profits. The benefit of investing in gold investments can give you a valuable return on your investment, while also minimizing the potential for financial loss.

What’s the best way to invest in gold?

The most direct way to own gold is to purchase physical gold bars or coins, but these can be illiquid and must be stored securely. ETFs and mutual funds that track the price of gold are also popular, and if you have access to derivatives markets in your brokerage account you can also use gold futures and options.

Is Gold ETF Safe?

Hedge against inflation: Gold is considered a safe investment because it can be used as a protection against currency fluctuation and inflation. Tax benefits: Gold ETFs older than a year attract long-term capital gains tax. However, there is no VAT, Wealth Tax or Securities Transaction Tax on gold ETFs.

What are the disadvantages of gold ETF?

There are cases where capital gain tax breaks that are applicable to traditional exchange traded fund do not apply when it comes to gold ETF. While you play in gold ETF you cannot ignore the demat account cost and annual maintenance that you have to pay.


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Frequently asked questions

When you buy or sell gold stock, you pay fees to your broker and the exchange where you buy or sell the stock. When you buy physical gold, you pay the dealer a premium above the metal’s value, or “spot price.” You may also have to pay for shipping to and from the dealer when you buy and sell.

Experts say, for investors looking to make a regular investment instead of a one-shot investment, then the gold fund option is better and rewarding. However, for those looking for a cost-effective option to invest in precious metal, then gold ETF is considered to be the right choice.

They offer a tax-friendly means to hold gold as the returns generated from Gold ETFs are subject to long-term capital gains tax. However, there will be no additional burden of sales tax, VAT, or wealth tax.

The 20 analysts offering 12-month price forecasts for Barrick Gold Corp have a median target of 26.00, with a high estimate of 35.00 and a low estimate of 20.00. The median estimate represents a +41.77% increase from the last price of 18.34.

And we know that gold inventory, understood as the total above-ground stock of physical gold is estimated to be around 190,000 tons. That’s about 6.1 billion ounces. At today’s dollar price (a little above $1,200 per ounce, as of November 11, 2018), that comes to about $7.3 trillion, a pretty large number.

The metal is abundant enough to create coins but rare enough so that not everyone can produce them. Gold doesn’t corrode, providing a sustainable store of value, and humans are physically and emotionally drawn to it. Societies and economies have placed value on gold, thus perpetuating its worth.

Historically, Gold reached an all time high of 2074.88 in August of 2020.

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Freddy Agard
Freddy Agard

Freddy Agard writes daily about financial products and specializes particularly in the equity markets. He is happy to tell you more and enjoys reducing complex material to manageable and understandable information. Questions? Leave a comment at the bottom of the page!

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