Why Invest in Gold Stocks?

Mankind has always valued gold and seen it as a precious commodity. After all, it’s shiny and yellowish and cool and the ladies love it. (When’s the last time you tried offering your special someone a lithium necklace for Valentine’s Day?). And until 1971, the U.S. adhered to the gold standard, where every dollar was worth its weight in gold – quite literally. That’s why gold stocks can be a smart play.

It’s what people return to when other currencies fail. When the dollar dies, when the ruble ruptures, when bitcoin blows up, gold will be there for you. Gold can hold its value when markets are tanking and it can be a solid hedge against inflation. For that reason, there are some gold stocks you’ll want to watch as we roll into February 2020.

But before we get to that, where does gold stand right now?

Gold Was a Phoenix Rising in 2019

In times of economic turmoil, gold prices tend to go up and gold stocks perform well. Whether it’s in gold mining, production or refinement, the gold industry can thrive when there is unrest.

And since the middle of last year, it has been a great time for gold. Gold stocks, across the board, are on the rise. And that’s despite the fact that the broader market has also been doing super awesome.

The SPDR Gold Shares (NYSE: GLD), the world’s largest gold ETF, has gone up around 23% in that time span to around $147. The price growth has slowed since the mid-fall but is still trending upward. Also, the VanEck Vectors Gold Miners ETF (NYSE: GDX) has returned about 41% since last May. Gold investors are thrilled that the bear market is over. It seems this gold bull run has legs.

The price of gold is constantly changing. But, today, gold costs around $1,558 per ounce. With that in mind, here are the top three gold stocks to watch in February.

Top 3 Gold Stocks to Watch in February 

Agnico Eagle Mines (NYSE: AEM)

• Market Cap: $14.60 billion

Agnico, the Canadian-based mining company with operations there, Finland and Mexico, is one of the hottest gold stocks on the market right now. The mining company posted quarterly earnings of $0.32 per share in the third quarter of 2019. Just one year ago Agnico reported earnings of $0.07 per share. 

This gold stock is one of the largest gold mining companies by market cap. Its dividend yield is currently hovering around 1.15% and its commitment to strong dividends in the future make this a solid stock as a dividend play. 

The gold mining company also has some interesting pipeline products in the hopper so the future is looking bright. That said, at its current prices hovering around $60, this precious metals stock is trading on the high end of the price spectrum. You’ll want to be a little bit cautious about that.

Yamana Gold (NYSE: AUY)

• Market Cap: $3.77 billion

If you’re looking for something quite a bit cheaper as a gold stock, Yamana Gold might be the stock for you. It trades around $3.75 lately. And considering its 52-week low of $1.78, it’s gained quite a bit of value since May.

Like Agnico Eagle. Yamana is a Canadian-based gold mining company. Its operations primarily include Canada, Brazil, Chile and Argentina. The company has been increasing its positive cash flows while decreasing its debt structure – a welcome sign for investors who see the growth potential of this company going forward.

The bottom line is that lately Yamana keeps beating earnings estimates. The Zacks Consensus Estimate of $0.02 per share for the last quarter was beaten by a 3 cents per share showing of $0.05. This has helped to pop the price of the gold stock. For now, Yamana remains one of the best gold stocks on the market.

Eldorado Gold Corp. (NYSE: EGO)

• Market Cap: $1.16 billion

Eldorado is a midcap Canadian gold mining company that had experienced a quadruple-digit gain of 909% to a high of $10.09 before slowly declining as the price lurched towards 2020. It’s currently trading around $7.20. 

Part of Eldorado’s positive earnings in the last two quarters is thanks to the price of gold increasing. So if you’re banking on a bullish gold market to continue, that could mean more very good things for this gold stock.

An even more important part of Eldorado’s success is its reopening of the Kilsadag mine in Turkey. The mine was shut down in 2018 due to poor gold recovery rates. 

After conducting research and tests, Eldorado has opened up the mine and implemented a new approach called heap leaching. Using this technique, the company will save about $500 million in capital spending. That’s definitely a good thing, as the company’s profit margin of 2.46% in Q3 is certainly slimmish. 

Eldorado expects to produce up to 550,000 this year. Investors are hoping that Eldorado is positioned to generate serious revenue and be a top-tier gold stock for years to come.

Investing in Gold Stocks

With gold prices surging investors are looking to invest in top gold stocks like these. The market may be a little overheated at the moment, but it still might be an opportune time to invest in gold. And here’s the thing. Times are good right now.

What happens when the next inevitable recession finally hits? Will more “fools rush in” to gold, driving prices even significantly higher than they are now? If that does happen, there really still is a lot of growth potential with these gold stocks.

The gold market moves quickly. So if you invest, make sure you diversify and don’t invest too heavily in one position. That’s especially true if you are heavy in commodities. Make sure you balance between precious metals like gold and energy stocks like natural gas or oil. Meanwhile, keep your eyes on these top gold stocks to watch in case you decide you’re ready to mine the benefits of that mellow yellow.

Good investing,

Peter