The price of gold has staged a brilliant rally over the past six months. Starting from a price of around USD 1650 per troy ounce, the precious metal has risen to over USD 2000 and is therefore only a few points below its all-time highs. With the rise in the price of gold, many gold mining stocks also recorded significant price gains. In this article, we present a selection of gold stocks and provide you with the most important information on the gold sector.
THE IMPORTANCE OF GOLD AS A SAFE HAVEN
Gold has always been considered a safe haven on the financial markets and can therefore be found in many portfolios of both professional and private investors. In times of economic turmoil, political uncertainty and increasing market volatility, investors often look for investment options that can serve as protection against such risks.
Gold fulfills this function due to the fact that, unlike paper currencies, it is not dependent on the creditworthiness of a government or central bank. As the precious metal is physically scarce and virtually indestructible, it retains or increases its value even in times of crisis when uncertainty on the stock markets increases.
These characteristics make gold an attractive investment for investors who want to diversify their portfolio and hedge against currency and inflation risks. As a safe haven, gold reduces portfolio volatility and offers stability in uncertain times.
The demand for gold usually increases in times of heightened geopolitical tensions, economic crises and recessions, which can lead to a rise in the price of gold. Overall, despite the development of alternative forms of investment such as cryptocurrencies, gold remains a preferred safe haven for many investors looking for stability and security in turbulent times.
GOLD SHARES AS AN ALTERNATIVE TO PHYSICAL GOLD
In addition to the physical purchase of gold or the purchase of a gold ETF, many investors invest in gold shares, i.e. shares in companies that are active in the gold industry. Their share prices naturally correlate to a high degree with the gold price, as a higher gold price generally has a positive effect on business.
Advantages of gold shares
Gold shares often offer further advantages compared to an investment in physical gold. Some gold shares pay reliable dividends and investors can therefore benefit from additional cash flow. Physical gold, on the other hand, does not generate any ongoing income and can incur additional costs for storage and insurance.
Another advantage of gold shares is the opportunity to invest in different segments of the gold industry. Investors can choose between established gold producers, younger and smaller exploration companies and royalty streaming companies. This diversification makes it possible to take advantage of opportunities in different market phases and stages of development in the gold industry.
Different types of gold shares
Gold shares can basically be divided into three main categories: Producers, exploration companies and royalty streaming companies. Each of these categories has its own special features and risks that investors should be aware of and take into account.
Gold producers
Gold producers are established companies that are active in gold mining and are already producing gold. These companies usually have several operating sites, mature infrastructures and stable cash flows from gold production. The largest gold producers include Barrick Gold, Newmont Corporation and AngloGold Ashanti. As these companies are directly dependent on the gold price, they benefit from a rising gold price, which leads to higher profit margins and sales. Shares in gold producers tend to be less volatile than shares in exploration companies and in some cases can pay dividends to their shareholders.
Exploration company
Exploration companies, also known as junior gold miners, are active in the early stages of gold extraction and focus on the discovery of new gold deposits. These companies are more speculative, as they often generate little or no income from the sale of gold. The success of an exploration company depends largely on its ability to identify valuable gold reserves and extract them successfully. Gold shares in exploration companies have a higher risk, but also offer a higher potential return if the company discovers a significant gold deposit and successfully brings it into production.
Royalty and streaming companies
Royalty and streaming companies are financing partners for gold producers and exploration companies. Instead of mining gold themselves, they finance the operations of other companies in exchange for a stake in their gold production (royalty) or for the right to purchase gold at a predetermined price in the future (streaming). Examples of successful royalty streaming companies are Franco-Nevada, Wheaton Precious Metals and Royal Gold. These companies benefit from the diversification of their investments in multiple projects and are less susceptible to operational risks. Royalty streaming stocks generally offer a lower risk profile than stocks of gold producers and exploration companies, but can also benefit from a rising gold price.
By investing specifically in different categories of gold shares, you as an investor have the opportunity to benefit from the various aspects of the gold industry and to better manage the risk of your portfolio.
GOLD STOCKS ETFS
ETFs are passive funds that are very popular among private investors and enable cost-effective and diversified investment in an entire sector. There are different types of gold ETFs that pursue different investment strategies.
For example, the SPDR Gold Shares (GLD) invests directly in physical gold and tracks the value of gold bars stored in special vaults.
On the other hand, many gold ETFs focus on the equity market and invest in companies active in gold mining. An example of this is the VanEck Vectors Gold Miners ETF (GDX), which holds a broadly diversified portfolio of gold mining stocks. There are also gold ETFs that focus on smaller gold producers, such as the VanEck Junior Gold Miners ETF, which invests in emerging and less established gold mining companies.
THE LARGEST AND BEST-KNOWN GOLD SHARES AT A GLANCE
The largest and most important gold mining companies come from countries such as Canada, the United States, Australia, South Africa, Russia and China. Some of the best-known companies are Barrick Gold and Wheaton Precious Metals from Canada, Newmont Corporation from the USA, Newcrest Mining from Australia, Anglogold Ashanti from South Africa, Polyus Gold from Russia and Zijin Mining Group from China. These companies play an important role in global gold production and dominate the sector due to the geological conditions and the size of their gold mining industry.
In the following table you will find a selection of gold shares from various countries, followed by detailed descriptions of some individual companies.
Top 10 gold stocks, sorted by market capitalization
| Company | Symbol | Country | Market capitalization |
| Newmont Goldcorp Corp | NEM | USA | 39,66 Mrd. USD |
| Barrick Gold Corp | ABX / GOLD | Canada | 34,16 Mrd. USD |
| Franco-Nevada Corporation | FNV | Canada | 29,43 Mrd USD |
| Agnico Eagle Mines Limited | AEM | Canada | 26,05 Mrd. USD |
| Wheaton Precious Metals Corp | WPM | Canada | 22,56 Mrd. USD |
| Newcrest Mining Ltd | NCM | Australia | 16,84 Mrd. USD |
| Gold Fields Limited | EDG | South Africa | 13,27 Mrd. USD |
| AngloGold Ashanti Limited | AOD | South Africa | 10,98 Mrd. USD |
| Northern Star Resources Ltd | NST | Australia | 10,09 Mrd. USD |
| Royal Gold Inc | RGLD | USA | 9,09 Mrd. USD |
BARRICK GOLD
- Company: Barrick Gold Corporation
- Symbol (TWS): ABX / GOLD
- ISIN: CA0679011084 / US7523443098
- Stock Exchange: Toronto Stock Exchange / New York Stock Exchange
- Country: Canada / USA
- Currency: CAD / USD
- Marktkapitalisierung: 46 Mrd. CAD / 34,16 Mrd. USD
- Umsatz (TTM) in USD: 11,01 Mrd.
Barrick Gold Corporation is the world's largest gold mining company and is headquartered in Toronto, Canada. In addition to the exploration, mine development, production and sale of gold, the company, which was founded in 1983, also mines silver and copper. Barrick Gold has interests in producing gold mines in Argentina, Canada, the Ivory Coast, the Democratic Republic of Congo, the Dominican Republic, Mali, Tanzania and the United States. The company also has interests in copper mines in Chile, Saudi Arabia and Zambia as well as various other projects in North and South America and Africa.
Brief analysis & outlook
The Barrick Gold share had a positive start to 2023 and rose from a price level of USD 17.50 to USD 20 before a correction followed, which caused the share to fall below USD 16 in the meantime. The share was then able to rise again quickly, but has not yet broken through the USD 20 mark at the time of writing this analysis. Should the breakout succeed, the upward trend would be confirmed and the technical chart would signal further upward potential. In the short to medium term, the next quarterly results could play an important role in the further development of the share price. Barrick Gold will publish its quarterly results for the first quarter of 2023 on May 3. Earnings per share of USD 0.12 are expected, which would correspond to a decline of USD 54 % compared to the previous year.
NEWMONT
- Company: Newmont Goldcorp Corp
- Symbol (TWS): NEM
- ISIN: US6516391066
- Stock Exchange: New York Stock Exchange
- Country: USA
- Currency: USD
- Market capitalization: USD 39.66 billion
- Turnover (TTM) in USD: 11.91 billion.
Newmont Corporation is engaged in the production and exploration of gold, as well as the exploration of copper, silver, zinc and lead. The company has operations and assets in the United States, Canada, Mexico, the Dominican Republic, Peru, Suriname, Argentina, Chile, Australia, and Ghana. As of December 31, 2020, it had proven and probable gold reserves of 94.2 million ounces and a land area of 58,900 square kilometers. The company was founded in 1916 and is headquartered in Denver, Colorado.
Brief analysis & outlook
A look at the daily chart of the Newmont Corporation share reveals the high correlation with Barrick Gold at first glance. When measuring the correlation with the correlation coefficient, this impression is confirmed and the measured correlation is mostly in the 90 % range and only rarely weakens in the short term. If the gold price remains at the current high level or even rises to new all-time highs, this should have a positive effect on gold mining stocks such as Barrick Gold and Newmont.
Newmont published its corporate results for the fourth quarter in February. While revenue of $3.2 billion exceeded estimates of $3.09 billion, gross margin missed forecasts as cost of sales of $1.78 billion exceeded expectations of $1.5 billion. The higher expenses were caused by wage increases, higher energy costs and other items and contributed to a net loss. For the current year, the company expects to increase sales further. On the one hand, the upper end of the forecast range for production is slightly above last year's level; on the other hand, the higher gold price is contributing to higher sales.
NEWCREST MINING
- Company: Newcrest Mining Limited
- Symbol (TWS): NCM
- ISIN: AU0000NCM7
- Stock Exchange: Australian Securities Exchange
- Country: Australia
- Currency: AUD
- Market capitalization: AUD 25.29 billion / USD 16.82 billion
- Turnover (TTM) in USD: 3.07 billion.
Newcrest Mining Limited is a company founded in 1966 and headquartered in Melbourne, Australia. Newcrest Mining develops and operates mines, sells gold and copper concentrates and is also involved in the exploration of silver deposits. The company primarily owns and operates mines and projects in Cadia and Telfer in Australia and Lihir in Papua New Guinea. It also holds a 70% interest in the Red Chris mine project in British Columbia, Canada.
Brief analysis & outlook
The Newcrest Mining share is currently in an upward trend with very strong momentum. The share price has almost doubled since the low in September 2022. However, there is clear technical resistance in the USD 29 range. Starting from this price level, strong downward movements followed from May 2021 and April 2022. Due to the technical resistance and the fact that the share is already in the overbought zone, a temporary setback should come as no surprise. However, as the share is in a stable upward trend, shows relative strength compared to other gold shares and the entire gold sector currently has a tailwind, there is a good chance that the resistance can be broken through.
The news agency Bloomberg recently reported that Newmont Corp (see above) wants to take over Newcrest and has been working on a deal for several months. The price reaction of Newcrest Mining shares to this news was positive, while Newmont shares reacted somewhat weaker.
FRANCO-NEVADA CORPORATION
- Company: Franco-Nevada Corporation
- Symbol (TWS): FNV
- ISIN: CA3518581051
- Stock Exchange: Toronto Stock Exchange
- Country: Canada
- Currency: CAD
- Market capitalization: CAD 39.6 billion / USD 29.43 billion
- Turnover (TTM) in USD: 0.98
FNV share chart from TradingView
Franco-Nevada is a leading Canadian precious metals streaming and royalty company based in Toronto, Ontario. Franco-Nevada was founded in 1983 and has since established itself as one of the world's largest and most successful precious metals royalty and streaming companies. Unlike traditional gold mining companies, Franco-Nevada does not operate mines itself, but generates revenue through the acquisition of royalties, streaming contracts and other agreements from gold and precious metals mines.
Franco-Nevada's portfolio comprises over 300 assets, with a focus on gold. However, it also has investments in silver, platinum and palladium as well as oil and gas. The geographical distribution of assets spans North and South America, Australia, Africa and Europe. This allows the company to benefit from the diversification of its investments and reduce risk in volatile markets.
Franco-Nevada's business strategy is to generate long-term, stable cash flows through the acquisition of precious metal streams and royalties while minimizing risk. Franco-Nevada is focused on growing its portfolio through the acquisition of high quality assets to create shareholder value and pay consistent long-term dividends.
Brief analysis & outlook
A major advantage of Franco-Nevada as a streaming and royalty company is its focus on royalties and the associated risk mitigation. The company is not faced with the capital and operating cost overruns that often plague mining companies. At the same time, Franco-Nevada's agreements enable it to benefit from the exploration and expansion projects of its mining partners. Franco-Nevada's license agreements allow it to make a lot of money by selling the physical commodities it receives. This cash flow allows the company to invest in new businesses and pay a dividend.
Franco-Nevada has increased its dividend every year since going public in 2008 and also has a debt-free balance sheet, which is a rarity in the mining industry and gives the company even more financial flexibility to invest in new royalty and streaming agreements.
GOLD FIELDS
- Company: Gold Fields Limited
- Symbol (TWS): EDGA / GFI
- ISIN: ZAE000018123 / US38059T1060
- Stock exchange: Johannesburg Stock Exchange / New York Stock Exchange
- Country: South Africa / USA
- Currency: ZAR / USD
- Market capitalization: USD 13.27 billion
- Turnover (TTM) in USD: 4.68 billion.
Gold Fields Limited is a gold producer with reserves and resources in Chile, South Africa, Ghana, West Africa, Australia and Peru. The company also explores for copper deposits. Gold Fields Limited has interests in 9 operating mines with annual production of approximately 2.24 million ounces of gold equivalent, gold mineral reserves of approximately 52.1 million ounces and mineral resources of approximately 116.0 million ounces. Gold Fields Limited was founded in 1887 and is based in Sandton, South Africa.
Brief analysis & outlook
The Gold Fields Limited share has obviously also benefited from the rising demand for gold in recent months and is currently in an upward trend with high momentum. With a P/E ratio of around 19, the share is certainly valued somewhat higher than the average of the last three years, but this does not necessarily mean that there is no further upside potential. It is interesting to note that Gold Fields has some promising exploration projects in the pipeline, which should have a positive impact on the company's earnings in the medium term, such as the Salares Norte gold and silver mine in Chile, where production is scheduled to start at the end of 2023.
It was recently announced that Gold Fields has agreed a joint venture in Ghana with the South African company AngloGold Ashanti. The joint venture covers the Tarkwa mine, in which Gold Fields holds a 90 % stake, and AngloGold Ashanti's Iduapriem mines. According to the two companies, the joint venture has an estimated annual production of 900,000 ounces of gold in the first five years and an average annual production of over 600,000 ounces of gold thereafter. In addition, the joint venture's operating costs per gold ounce are expected to be less than 1,000 $ in the first five years and less than 1,200 $ in the sixth year and beyond.