The Best Gold Stock in 2022 – Is this a solid addition for your portfolio?

The Best Gold Stock in 2022

The Best Gold Stock in 2022 – Gold has been considered a safe place at the time of economic uncertainty and market volatility and remains one of the best precious metals that has ruled the market. Many investors get gold exposure by buying shares of companies involved in mining and exploration.

Many of these companies have become large in this industry and are considered one of the 10 top gold mining companies in the world. Gold shares have performed poorly in the market last year for several reasons but shares have a strong potential to outperform the market in the coming years. If you are not interested in buying and holding physical gold, you can invest in gold stocks and gold exchange exchange funds (ETF).

The Best Gold Stock in 2022

What are Gold Stocks?

Gold stocks, as the name suggests, are publicly traded instruments that focus on gold. It is a vast industry and consists of different types of companies including:
  • Mining companies: The companies that mine and then sell gold.
  • Gold streaming and royalty: The companies pay fees to the mining companies for a part of mine’s revenue, the right to buy the future production of gold at a certain mine for a certain price, and a part of the mine’s revenue.
  • Gold-focused exchange-traded funds: The funds hold physical gold or shares of different gold mining companies.
There are many advantages of buying gold stocks over holding physical gold. You can enjoy higher returns on the investment and do away with the worry of holding the metal in a secure place. That said, you can also enjoy capital appreciation in the long term. This is because the companies can manage to expand the production while reducing costs and it allows them to outperform the gold price. But, keep in mind that all gold stocks will not outperform gold. Because of this, you need to be very careful in choosing the best gold stocks to add to your portfolio.

Choosing the best gold stocks

Several factors affect the price of gold and for many years it has been the top choice for investors who seek to hedge against the risks of inflation and monetary policies. The surge and popularity of crypto-like bitcoin could lead to gold losing its luster, which is a huge risk that investors need to keep in mind.
However, the best way to invest in the gold market is not by purchasing physical gold bars but through gold mining companies. This is because they benefit from the rise in gold prices and the ability to increase production while reducing costs. Some of the top gold mining companies have outperformed the stock market and the price of gold.
The miners have low-cost structures, minimal debt, and limited exposure to risky projects while the gold streaming companies offer the best risk-reward potential amongst all the investment options. Hence, they are well-positioned to benefit from the high gold prices without taking the risks associated with mining physical gold. Investors who are not keen on identifying and investing in the best gold mining stocks can consider buying the shares through gold exchange-traded funds. It is a cost-effective and convenient option for investing in gold stocks.
The ETF will also offer more exposure to the sector and you will not need a financial advisor to help you pick the right stocks to make the most of the industry’s upside.

Overview of the best gold stocks

Stock Best For
Barrick Gold Corporation  Solid dividend yield
Franco-Nevada Corporation Growth potential
Newmont Corporation Market Outperformer
Wheaton Precious Metals Low risk, consistent growth
Kinross Gold Dividend income
VanEck Vectors Gold Miners ETF Best gold ETF

Best gold stocks

You will find several companies focusing on mining gold and it might give you many options but only a few shine out as the best gold stocks to add to your portfolio.

Barrick Gold Corporation

One of the largest gold mining companies across the world, Barrick Gold strives to be the most valuable company. It focuses on running the Tier 1 mining assets and can produce more than 500,000 ounces of gold annually. The Canada-based company has 10 years of productive life remaining and is known for its cost-efficient operations.
Barrick Gold Corporation plans to produce 5 million ounces annually through 2030. It also forecasts that the sustaining costs will reduce in the future. If it manages to reduce costs, the profits will continue to grow even if the gold prices decline. The company has a solid gold mining portfolio and an impressive balance sheet. For many years, Barrick Gold Corporation focused on debt repayment through free cash flow and the sale of its non-core assets.
This helped the company to reduce the interest cost and increase financial flexibility. The company has paid a growing dividend and it has a 33-year dividend history with a dividend yield of 1.77%.

Franco-Nevada Corporation

Another Canadian streaming and royalty company, Franco-Nevada Corporation has a well-diversified portfolio with several agreements tied to precious metals including gold, silver, iron ore, platinum, and oil and gas. More than 50% of its revenue in 2021 was generated from gold. Since the company focuses on streaming and royalties, it minimizes the risk. Hence, it does not have any trouble with the capital or operating expense overruns that have hampered the growth of several mining companies in the past.
As its mining partners proceed with their exploration projections, Franco-Nevada gains to profit due to its agreements. It has contracts with many companies that give it the ability to generate cash through the sale of physical commodities it receives. Through this, it generates cash flow which facilitates the investment in new deals while paying a consistent dividend since 2008.
The most impressive aspect of the company is its debt-free balance sheet, which is a rarity today. The stock has outperformed the price of gold as well as several other mining stocks. It has a dividend yield of 0.79% and the stock is up 122% over the past five years.

Newmont Corporation

The Newmont Corporation stock has enjoyed an upward trend whenever there is a rise in global gold prices. Newmont Corporation gets about 94% of the revenue from gold and its solid performance shows that the company is making good money from the yellow metal. The stock offers a blend of value and earnings growth with a dividend yield that is triple that of the S&P 500.
One of the top gold producers in the world, Newmont also focuses on technology and climate. The financial health and growth prospects of the company demonstrate its potential to outperform the market. Newmont corp is a dividend-paying company with an impressive dividend yield of 3.32%.
It has a market cap of $52 billion and is one of the largest metal producers today. Its production of silver, copper, lead, and zinc is a byproduct of all its gold mining operations that range from Canada to the United States, South America, Africa, and Australia. By the end of 2020, the company held gold reserves of 93 million ounces across the 36,600 square miles of its worldwide territory. It is certainly one of the biggest names in NYSE and NASDAQ that qualifies as one of the top stocks to buy.

Wheaton Precious Metals

A precious metals company, Wheaton makes money by selling materials from the deposits of gold, silver, cobalt, and palladium. It has two dozen mining assets and is also developing many more to ensure a steady supply of precious metals for the years to come. The company produced 367,000 ounces of gold in 2020 and 341,000 ounces in 2021.
It is a company that does not focus on being a gold producer but instead focuses on the precious metals streaming agreements where it provides funding for the development and operation of mines. This allows the company to benefit from the ability to buy some or all of the gold produced at the mine. One of the largest metals streaming companies in the world, it has a market cap of $20 billion.
Wheaton precious metals has an interest in 23 operating mines and many development-stage mines around the world. With the investment, you also enjoy regular dividends. It has a dividend yield of 1.32%. The stock price has experienced fluctuations in the past but the price did not vary by more than $10.

Kinross Gold

Another Canada-based gold and silver mining company, Kinross Gold Corporation operates several active gold mines and is a mid-cap gold producer with operations spread out across the world. The company has a healthy balance sheet and the stock is attractively valued. It has already become a leader in the industry with mines in Brazil, U.S., Russia, Ghana, and Mauritania.
Kinross is a revenue growth powerhouse and has reintroduced dividend payments recently. It remains an undervalued stock with massive growth potential. The current dividend yield on the stock is 2.31%. It also has strong fundamentals with a revenue of $3,729.4 million and gold production consistently growing.

VanEck Vectors Gold Miners ETF

VanEck Vectors Gold Miners ETF holds the stocks of the top gold mining companies and is one of the largest gold ETFs holding more than $13 billion in assets as of 2021. The company holds shares in 60 gold mining companies including Barrick Gold Corporation, Wheaton Precious Metals, and Franco Nevada Corporation. Hence, if you do not want to buy an individual gold stock, you can consider investing in the ETF.
It will allow you to own a diverse group of large-scale companies and has an expense ratio of 0.515 which is a cost-efficient way to invest in various gold stocks. This fund is weighted by market cap and is heavily weighted since it holds some of the top miners including Newmont, Franco-Nevada, and Barrick Gold. Most of its funds are focused on the top ten holdings which makes it a top-heavy ETF.
One thing to keep in mind is that gold miners are more reactive to the price of gold than gold ETFs which hold the metal. So if the value of gold rises, then it is boom time for mining companies and more stability in the long run.

Summary of the top gold stocks 

Stock Cost (as on closing March 2, 2022) Dividend yield Market cap (in billions)
Barrick Gold Corporation $23.46 1.77% $40.15
Franco-Nevada Corporation $191.16 0.85% $28.12
Newmont Corporation $69 3.19% $52.46
Wheaton Precious Metals $45.84 1.31% $20.65
Kinross Gold $5.19 2.31% $6.23
VanEck Vectors Gold Miners ETF Large purchases $33.12 0.57%

FAQs

Are gold stocks a safe investment?
If you have thoroughly researched the stocks you want to buy, investing in gold could be a suitable choice. Considering the historical returns can give you an idea of what to expect based on the assumptions but you must keep in mind that the past performance will not guarantee future returns. But gold has performed well even in market turbulence and it can provide a certain level of safety as compared to the other stocks.
Should I buy physical gold or gold stocks?
When choosing between buying physical gold or gold stocks, you need to consider your investment goals and horizon. Those who want to take advantage of owning physical gold will prefer this option if they can handle the security and storage issues. While others may choose to invest in gold stocks to enjoy the financial return without incurring heavy storage costs.
What are the benefits of investing in gold ETFs?
There are several benefits of investing in gold ETFs and one of the top benefits is that you will not hold physical gold. You can own the metal without worrying about its storage and security. Additionally, it offers complete transparency and you can invest in various gold mining companies instead of focusing on a single one. It is a convenient and cost-efficient way of owning gold.

The bottom line

Investing in gold stocks is a smart choice and a great way to protect your portfolio from market volatility. As long as the companies manage gold production, they will be able to report solid fundamentals. By investing in some of the top gold mining and royalty companies in the world, you will be able to ensure high liquidity and make the most of the appreciation in the value of the stock.
Since most of these companies pay a consistent dividend, you also have a chance to enjoy passive income. Gold is in a great position to continue the upward trend, given the current global situations and the hiking cycle and its impact on gold.
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