Investors still value the idea of a tangible store of value that may guard against the inflationary forces that occasionally afflict monetary systems, which is why gold has drawn interest for millennia. Despite the fact that there are wise ways to invest in gold as a commodity, many investors like the growth and income possibilities that gold stocks provide.
Most people who are interested in the gold market can benefit from three main techniques of investing in gold stocks, each of which has pros and cons. You can gain important exposure to the yellow metal and profit from price increases by selecting gold mining stocks, gold streaming and royalty firms, or exchange-traded funds that concentrate on gold stocks.
| GOLD STOCK INVESTMENT | CATEGORY | 5-YEAR AVERAGE ANNUAL RETURN |
|---|---|---|
| Goldcorp (GG) | Mining stock | (7.7%) |
| Newmont Mining (NEM 2.46%) | Mining stock | (3.6%) |
| Franco-Nevada (FNV 2.05%) | Streaming/royalty stock | (1.2%) |
| Royal Gold (RGLD 2.17%) | Streaming/royalty stock | (0.2%) |
| VanEck Vectors Gold Miners (GDX 2.95%) | Gold stock ETF | (5.9%) |
| VanEck Vectors Junior Gold Miners (GDXJ 3.05%) | Gold stock ETF | (6.7%) |
Mining Stocks
Gold mining stocks offer exposure to gold prices, but they also introduce the opportunity and risks involved with mining operations. Specific mining assets can pan out better or worse than anticipated, and when that happens, stocks can rise or fall regardless of whether the price of gold climbs or declines. Larger gold mining companies have a wider array of assets that help diversify their overall portfolios, leaving them less vulnerable to problems at any one particular mine.
Goldcorp is one of the world’s largest gold producers, and the Canadian company has high hopes for further growth. After producing almost 2.9 million ounces of gold in its 2016 fiscal year, Goldcorp hopes to boost production to between 3 million and 4 million ounces within the next four years. Its key mining properties include the Eleonore mine in Canada, the Cerro Negro mine in Argentina, and the Penasquito mine in Mexico. In addition, Goldcorp hopes to keep boosting its reserves by further developing existing holdings and looking for smart strategic acquisitions. With anticipated declines in its already low all-in-sustaining cost structure, Goldcorp plans to focus on its most efficient operations to maximize profit even if gold prices don’t improve from current levels.
Exchange-traded funds allow you to purchase a variety of stocks with a single transaction, and the two gold mining ETFs provide various levels of industry exposure. The major businesses in the industry are the focus of the VanEck Vectors Gold Miners ETF. Among the equities it owns are Goldcorp, Newmont, Franco-Nevada, and Royal Gold, among a number of other stocks. The ETF reduces the likelihood that anyone mining business will experience an unanticipated catastrophic event by holding shares in about 50 distinct mining companies.
The VanEck Vectors Junior Gold Miners ETF can be preferred by investors that are interested in smaller gold miners. Although two-thirds of the portfolio is invested in businesses that most people would classify as mid-cap, this fund concentrates more on the smaller plays in the market and has a history of trading more aggressively in either way in response to shifting gold prices.
