While it may be odd to start a list of best gold stocks to buy now with a caveat, investors ought to know that the narrative for precious metals is extremely risky. At the same time, contrarianism tends to be very profitable as fewer people are looking at the target trade. Therefore, once the public gets wind of the bullish opportunity, the wave comes in, driving up the sector to potentially ridiculous heights.
That’s the optimistic thesis. In reality, investors must have incredibly strong conviction to take a dip in the precious metals sector, even with the so-called best gold stocks to buy now. At the moment, a strong U.S. dollar index buoyed by the Federal Reserve’s commitment to killing inflation has imposed an ugly environment for gold and other commodities.
Nevertheless, two factors bolster the case for the best gold stocks to buy now. First is the fear trade. What I mean is that with economic and geopolitical scourges going all biblical on everybody, there’s a lot of fear in the air. In turn, precious metals historically have been a safe haven.
Second, the Fed can always go too far. Remember, money velocity is down near all-time lows, which is ultimately deflationary. A monetary course reversal could then bolster these best gold stocks to buy.
Commanding the largest gold reserve base in the industry per its website, Newmont (NYSE:NEM) represents an obvious choice for the best gold stocks to buy. The proof is in the pudding. Despite rough seas in the spot price of the yellow metal, NEM shares are only down about 1% on a year-to-date basis. At its peak, it was up 40% year-to-date (or YTD), suggesting that this might be a great discount to consider.
Fundamentally, one of the factors that support NEM as a long-term play among the best gold stocks to buy is that it’s not just levered to precious metals. Newmont mines a considerable amount of copper every year, an already relevant commodity that’s becoming even more significant. For instance, copper plays a significant role in the manufacturing of electric vehicles.
Another factor to consider for NEM is its passive income potential. Currently, the company has a forward yield of 3.67%, whereas the average yield for the materials sector is 2.82%.
Agnico Eagle Mines (AEM)
Mining cart in a silver, copper, and gold mine
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A Canada-based senior gold mining firm, Agnico Eagle Mines (NYSE:AEM) features production activities in Finland and Mexico, along with its home market. In addition, Agnico’s exploration and development activities extend to the U.S.
Interestingly, Agnico distinguishes itself from the other best gold mining stocks to buy with its longstanding policy of not selling any of its future gold production forward. For clarification, a gold forward contract is a transaction in which two parties bilaterally agree on the purchase and sale of gold at a future date.
Further, many analysts consider AEM to be one of the best gold mining stocks to buy for its robust financials. The company has solid strengths in its balance sheet and as a better highlight, provides a compelling profitability picture. For example, its return on equity (ROE) is nearly 6.5%, whereas the industry median has currently slipped into negative territory.
Finally, Agnico Eagle pays a forward yield of 3.54%, which again is notably higher than the materials sector average.
Gold Stocks to Buy: Gold Fields (GFI)
a construction worker looks on as an excavator gets to work in a mine
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Headquartered in Johannesburg, South Africa, Gold Fields (NYSE:GFI) is one of the world’s largest gold mining firms. A core advantage for GFI is its geopolitical status. While Russia is one of the top resource exporters, it’s safe to say that international relations with the country may have taken a step back from them. Therefore, just from a geopolitical stance, GFI could be interesting.
Currently, Gold Fields has an extensive reach in terms of its mining operations. In addition to its home market, its footprint extends to the Americas, Australia and West Africa.
As with the other top names among the best gold stocks to buy, GFI enjoys solid financials. While its balance sheet could admittedly use some work, the company scores highly against profitability metrics. For example, its operating margin of 37.4% is well above the industry median of 6.9%. In addition, its ROE is 20.5%, which again compares favorably to the industry since the sector median is in negative territory.
Franco-Nevada (FNV)
An image of multiple gold bars
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Based in Toronto, Ontario, Franco-Nevada (NYSE:FNV) presents a diverse profile for any list featuring the best gold stocks to buy. Rather than directly mining precious metals itself, Franco-Nevada utilizes both royalty and streaming models.
Here’s the difference between the two. A royalty contract represents a right to a certain percentage of revenue in exchange for upfront capital. On other hand, a streaming contract is a right to a fixed percentage of physical metals.
Generally speaking, royalty and streaming firms tend to be more stable than pure mining companies, which is why FNV ranks highly among the best gold stocks to buy now. Indeed, the company features several excellent components within its financials. Notably, Franco-Nevada has no debt and scores incredibly well in terms of profitability metrics.
Against a basket of valuation gauges, FNV is considered modestly undervalued. With volatility appearing to have died down recently (shares are presently down about 3% YTD), contrarians might want to take a closer look at Franco-Nevada.
Gold Stocks to Buy: Wheaton Precious Metals (WPM)
Wheaton Precious Metals logo close-up on website page. WPM stock.
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Another Canadian firm that offers tangential exposure to pure-play mining operations, Wheaton Precious Metals (NYSE:WPM) is one of the world’s largest precious metal streaming companies. Just as a quick recap, streaming involves a capture of a previously agreed-upon percentage of physical commodities in exchange for upfront capital.
One of the reasons why streaming companies often rank among the best gold stocks to buy is that they foster cost predictability for investors. While pure-play ideas may offer the highest reward potential, the mining sector is volatile. Taking aside the already wild spot price, things can go wrong in the mining front. By having prior established contracts, though, WPM is able to mitigate forward ambiguities.
Now, whether an investor wants to buy WPM or FNV may come down to the yield. Currently, the latter provides a forward yield of just under 1%, whereas the former is at 1.7%. Both companies have strong financial metrics and yes, WPM is also considered modestly undervalued.
Seabridge Gold (SA)
A photo of a gold nugget on a table, being picked up by tweezers, with more gold behind it.
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For the final two ideas on this list of the best gold stocks to buy, I’m going to dedicate to the speculative side of the spectrum. First up is Seabridge Gold (NYSE:SA). Based in Canada, Seabridge is pursuing the development of the Kerr Sulphurets Mitchell gold-silver-molybdenum-copper mine in northwest British Columbia. Obviously, a major plus here is the friendly geopolitical profile.
Further, Seabridge claims that it’s developing one of the world’s largest resources of gold, copper and silver. Should the industries of tomorrow such as mass integration of EVs pan out successfully, then Seabridge could be a very significant player.
Of course, as a junior player among the best gold stocks to buy, investors must exercise an abundance of caution. Case in point is its YTD loss, which presently stands at around 26%. Still, the upside potential is massive if the thesis eventually swings the needle northbound.
Gold Stocks to Buy: OceanaGold (OCANF)
gold bars representing gold stocks
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Right off the bat, you know that OceanaGold (OTCMKTS:OCANF) is a high-risk, high-reward venture thanks to its funky ticker symbol. Just as a quick reminder, OCANF trades over the counter, which means that broker-dealer networks help facilitate transactions. Put another way, the OTC market is not an exchange so you can expect administrative issues such as liquidity challenges.
Nevertheless, OceanaGold has also made it onto the holdings list of Sprott Junior Gold Miners ETF (NYSEARCA:SGDJ). If you know anything about Sprott’s founder Eric Sprott, you’ll essentially recognize him as gold-mine Jesus. When Sprott speaks, everyone in the sector listens.
Of course, with OCANF priced in what many analysts consider penny-stock territory, you must exercise extreme vigilance. Still, there’s a reason why the Sprott Junior Gold Miners ETF has OceanaGold in its holdings. Mainly, I believe it has to do with its surprisingly robust financial profile. The company combines solid strengths in its books while presenting a favorable profitability picture.
On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. However, the writer holds a long position in physical gold bullion. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
