Precious metals are traditionally viewed as safe havens, typically showing strength during times of market turmoil and geopolitical uncertainty. Historically, they are also viewed as inflation hedges and preferred assets to protect against rising rates. Here, 10 resource specialists and contributors to MoneyShow.com highlight their favorite stocks and ETFs for investors seeking exposure to gold and silver.
The commodity bull market is being fueled by rising inflation with no end in sight. The Russian war has exacerbated the move in inflation with more uncertainty, and a run towards tangible assets and away from financial assets. This bull market in commodities was already under way and it’s poised to rise for several years to come.
With gold rising higher than silver, and gold shares rising more than gold, and seniors stronger than juniors, it’s telling us gold is “king” for now. It’s the ultimate safe haven and it’s being confirmed by investors running to safety. Plus, with senior miners stronger than juniors, it’s reflecting value over risk. The big picture is still wide open for a “super rise” within an ongoing bull market.
Overall, our recommended gold shares are doing great. The best ones that recently reached new highs above their June 2021 highs are Royal Gold (RGLD), newmont (NEM), Yamana Gold (AUY) and Franco Nevada (FNV).
For now, gold is stronger than silver and gold could continue rising more than silver in the upcoming months. But looking out to the longer term, Silver is poised to be the better performer. Silver’s time is coming. Two of our recommended holdings are silver-related — Hecla Mining (HL) and Pan American Silver (PAAS). Silver is now making its way toward the $30 level. Once broken, it’ll be off and running.
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Precious metals have outshined equities so far this year, and when gold sours, the shares of companies that mine the metal tend to significantly outperform the bullion in percentage terms. Among those that have lately commanded attention is Agnico Eagle Mines (AEM), a senior Canadian gold miner.
The company has a pipeline of high-quality exploration and development projects in the US, Canada (including the just-closed acquisition of Kirkland Lake), Columbia and Mexico, and whose policy of no-forward gold sales gives it full exposure to current gold prices, which today is a great place to be.
Agnico recently reported several record results for full-year 2021: The company posted solid annual gold production of around 2.09 million ounces with all-in sustaining costs of $1,038 per ounce (well under the current gold price of around $2,000. Impressively, Q4 was also Agnico’s fifth consecutive quarter of over half a million ounces in gold production.
The strong results prompted Agnico to hike its dividend 14% (2.6% annual yield) and announce a $500 million share buyback program. Looking ahead, analysts see the top line growing 41% in Q1, followed by three more quarters of 60-ish percent growth (mostly due to the Kirkland acquisition), but of course the wild card here is gold prices, as upside will fall right to Agnico’s bottom line.
Take your pick: inflation at a 40-year high, Russia/Ukraine tensions or the start of a new Fed tightening cycle. Each is a good reason by itself to own gold, but collectively they make a very compelling argument.
US Global GO GOLD and Precious Metal Miners ETF (GOAU) is a unique way to invest in gold. The exchange-traded fund is set up as a royalty trust, which is a special type of company.
GOAU provides a one-time payment to gold mining companies in exchange for an agreed upon percentage of the gold it produces. Best of all, GOAU is contractually entitled to a set number of ounces at a predetermined, always below market price of gold.
The only risk that GOAU takes is if the price of gold falls below its discounted purchase prices. And with gold still hovering around $1,946 an ounce, it spells nothing but big paydays for GOAU.
Royalty and streaming companies are the low-risk way to invest in the gold mining sector. But you don’t give up much upside by doing this. Essentially, a royalty company will make an upfront payment to a mining company in exchange for a small percentage of the gold that is mined. A stream is similar, except the company pays a modest per-ounce cost when received in addition to an upfront payment.
Franco-Nevada (FNV) reported a strong fourth quarter on the back of higher production at Cobre Panama, its largest stream, and record oil and gas revenue. Overall, for the year, there was record revenue of $1.3 billion, up 27%, coming in at the high end of its guidance.
Franco ended the quarter with $539 million in cash, no debt, and $1.1 billion available on its credit facilities. It increased its dividend again, by nearly 7%, for the 15th consecutive dividend increase.
Asset diversification separates Franco from other gold royalty companies. Franco has a lower percentage of gold and silver than other large royalty and streaming companies, which diversification it now calls a distinguishing advantage. It is probably a feature that makes the company attractive to generalist investors.
The company is also well diversified in terms of its assets, operators and geography. Franco sees the pipeline quite strong across a variety of financing needs. Franco-Nevada continues to be one of our core investments.
Royalty and streaming companies have far lower exposure to operating cost inflation than miners and less exposure to potentially increasing taxes. So, they remain attractive investments for the current environment.
Wheaton Precious Metals (WPM) reported record revenue and earnings for the fourth quarter, though it missed analyst forecasts by a small amount. For the year, revenue was $1.2 billion. Royalties on gold and silver are currently 94% of revenues.
The Salobo expansion (Salobo III), which is part of the project that represents Wheaton’s largest single asset, was delayed because of landslides; it had been 85% complete at year end. Vale is conducting a thorough review of the project, which should be complete sometime in the second quarter. At present, the expansion is still on track for a year-end start up.
Wheaton has a solid balance sheet, with available liquidity now up to $2.2 billion. With cash, a strong credit facility and anticipate strong cash flows in coming years, CEO Randy Smallwood said he did not think the company would ever have to issue another share.
Wheaton focuses on assets with low costs, with 85% of its assets in the lower half of the cost curve, and reserves with over 30 years of life. Wheaton is forecasting an average of 20% growth over the next 10 years.
Wheaton (whose current yield is 1.3%) has been included in the S&P Canadian Dividend Aristocrats Index. The stock is a core holding for us; but given the 25% plus run up since the end of January, we are holding and looking for a pullback to buy.
The Fed can’t stop inflation. It’s a huge dilemma, and investors are catching on. What can you do about it? Well, silver crushes inflation. In the 1970s, we experienced an entire decade of high and rising inflation. Yet silver generated a gain of 3,700%. That’s not a typo. And silver stocks did considerably better than that.
I think we’re in for an inflationary shock, and as investors come to realize this, they’re going towards flock silver. And that will help push this sector much, much higher. Technically, silver has been quite strong and the 50-day moving average looks about ready to cross above the 200-day moving average, forming a bullish “golden cross”. Silver’s upside targets are $26.50, $27, then $28.
Silver stocks, while constructive, have more work to do. The Global X Silver Miners ETF (SIL) has clear resistance at the $38 level. Once it crosses $38, there’s a pretty clear path to $41.
And looking at the PureFunds ISE Junior Silver ETF (SILJ) — which is actually mid-tier silver companies — we see a lot of recent strength. The $14.50 area appears to be the main overhead resistance level. After that, $15.50, then $17.50 look like the next upside targets.
Overall, silver’s technical picture is looking quite strong. And with the rate hikes now officially started, I think we could see silver continue to climb. On a seasonal basis, the next couple of months suggest more strength ahead.
Gold is consolidating the recent pull back, above the January uptrend, which coincidently is gold’s key break-out level in February at the $1900-$1925 level. Our leading indicator continues to show momentum building in favor of gold. Gold miners are holding up strong. They’ve been outperforming most asset classes recently and are looking ripe for more upside.
novagold (NG) continues to march upward, within a clear up-channel since the January lows, recently testing the $8 handle, which is also near the October 2021 highs. A break above this level and it’s off to the races! A rise to the June highs near $10 would then be likely. The leading indicator is at a high area showing momentum favoring NG. However, it’s resisting at a high area suggesting some consolidation short-term is possible.
Harmony Gold Mining (HMY) is forming a bullish flag pattern with resistance at $5.50. This means, if HMY breaks above $5.50 it could rise to the $7 target level. The leading indicator is pulling back and looking for a bottom. It’s telling us short-term weakness may be over and a renewed up-move is now likely. On…
Credit: www.forbes.com /