After hitting a record high of more than $2,000 in the summer of 2020, the precious metal gold $Gold - Apr 2023(GC2304)$ has returned to investors' sights after being silent for more than two years.
Given that gold has recently tested highs above $2,000 an ounce, it may be wise for investors to take a second look at many of the hard-hit gold stocks before the rally extends.
Gold has been on fire lately, is it time to add gold stocks to your portfolio?
While it's difficult to predict the future direction of gold, it's a smart move to allocate a small portion of your portfolio to undervalued gold stocks and reap the rewards of handsome dividend yields. The rise in gold prices won't last forever, and on a longer time frame, it may be outpaced by the stock market. However, buying gold stocks now makes perfect sense if you consider gold as a diversification factor in your portfolio.
In fact, it is often the unseen risks that hurt a portfolio the most. If a recession turns out to be more pessimistic than expected, gold tends to shine as the backbone of stable investment returns when stock markets start to free fall.
Here's one gold stock that's no stranger to mining investors, and one that's rebounded 35% from its November 2022 low: Barrick Gold $Barrick Gold Corp(GOLD)$ (TSX:ABX ).
barrick gold
Barrick Gold Corp., the world's second-largest gold producer and Canada's largest gold stock by market value, produced more than 4.1 million ounces of gold and 440 million pounds of copper last year. As a mining giant worth C$45.5 billion, Barrick has a solid and reliable management team and leading production assets.
Best of all, this gold stock now offers a generous 2.83% dividend yield, and the safety of that dividend is guaranteed. Considering all the risks that investors are worried about at this stage, including recession, inflation, wave of bank failures and mass layoffs, may trigger risk aversion, the possibility of a sharp decline in gold prices is extremely slim.
And, with gold on the verge of making new highs, Barrick's stock price is actually closer to its 2022 low than its 2020 high. If you think gold can stay above $2,000 an ounce for longer, now should be an opportunity to position yourself in this gold stock.
Barrick's current stock price is down about 34% from its all-time high above C$40. And the longer gold prices stay strong, the more profit Barrick and his peers can make by selling them at higher prices. Even if gold's rally falters a bit, a beta of 0.13 (meaning a low correlation with the broader TSX index) means investors will be rewarded if stocks turn down in a recession.
To sum up, Barrick Gold is currently the leading stock in the gold sector in terms of fundamentals, stock prices, dividends, and correlation with the stock market.
If you are interested in investing in gold stocks, please also pay attention to NAI500's weekly selection of metal investment opportunities:
Emergent Metals Corp. (TSXV: EMR, $Emergent Metals Corp.(EGMCF)$ )
Emergent Metals Corp. is a company focused on exploration for gold, silver and base metals in Nevada and Quebec. The company's strategy is to seek asset acquisition targets in a buyer's market environment, increase the value of acquisition targets through the computerization and remodeling of historical exploration data, new exploration, and the application of modern geophysical surveys, and through sales, joint ventures, Options, royalties and other commercial transactions seek divestitures to advance their projects and create value for shareholders.
Disclaimer: NAI is paid to publish this content. The material contained in this content is for informational purposes only and is not intended to constitute an offering of securities in any jurisdiction. This content should not be construed as an offer, solicitation or recommendation to buy or sell products or securities.
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