Best Gold Stocks And Shares

Barrick Gold is a mining company, headquartered in Canada and listed on the New York Stock Exchange.

The company operates 13 gold mines in North America, the Caribbean and Africa, along with three copper mines. It produces over 4 million ounces of gold per year, making it the second-largest producer globally.

Matt Britzman, investment analyst at Hargreaves Lansdown, comments: “High-quality assets are one of Barrick’s main attractions, and a large geographical footprint helps limit some of the political uncertainty inherent in mining operations.”

Although the company has delivered strong returns to shareholders over the past five years, its share price has fallen by almost a third in the last 12 months.

Mr Britzman explains: “2022 was a challenging year for Barrick, and many gold miners for that matter, as rising costs were met with broadly flat average gold selling prices – the result was a decent hit to profits.

“But gold prices bounced back over the tail-end of 2022 and remain high enough for low-cost producers like Barrick to generate healthy cash flows.”

In terms of outlook, Barrick’s fortunes are closely tied to gold (and copper) prices, with continued uncertainty about the impact of inflation and interest rates.

Mr Britzman adds: “Cost challenges aren’t going away anytime soon but Barrick’s top-tier gold portfolio is backed up by a strong balance sheet, benefiting from the good conditions over the past few years.

“From that place of strength, a £1 billion share buyback was announced in February and the 3.2% forward dividend yield looks well-covered.”

Centamin is a gold mining company, headquartered in Jersey and listed on the mid-cap FTSE 250 index of the London Stock Exchange.

The company has mining operations in Egypt and Cote d’Ivoire, along with exploration activities at different stages of progression in Egypt, Cote d’Ivoire and Burkina Faso.

Joshua Mahony, senior market analyst at IG, comments: “Centamin has both the guaranteed output from their Egyptian mine, and potential exploration upside in Côte d’Ivoire and Burkina Faso.

“Their Sukari mine in Egypt has an estimated 12 years worth of production left to be recovered, with the company recently boosted by the biggest upgrade in over 10 years, raising it to 1.1 million ounces. This allows the company to ramp up production while also hoping to enjoy new discoveries elsewhere in Africa.”

Its flagship asset, the Sukari Gold Mine in Egypt, aims to produce 500,000 ounces of gold a year. However, the mine suffered various setbacks in 2020, leading to a halving in the company’s share price.

The company’s share price has subsequently bounced back, recently hitting its highest level since early 2021, although it remains well below its record high in mid-2020.

There is also positive momentum in terms of the outlook for production. Mr Mahony comments: “The 2022 gold production figure of 441,000 ounces represents a 6% increase on their 2021 figure.

“This provides an alternative to Fresnillo (featured below) with greater exploration exposure and the benefit of an upward path in gold production.”

However, given the company’s dependence on gold prices, investors should expect volatility along the way.

Fresnillo is a precious metals mining company, headquartered in Mexico and listed on the large-cap FTSE 100 index of the London Stock Exchange.

The company operates six mines across Mexico, together with a portfolio of exploration prospects. Fresnillo is a leading global producer of silver and one of the largest gold producers in Mexico.

IG’s Joshua Mahony comments: “This Mexico-focused miner produces a substantial amount of gold, although the 636,000 ounces produced in 2022 stands around 15% lower than their 2021 output.”

“The guidance for 2023 production signals the potential to come in either side of current gold production, but the sheer amount of gold and silver being largely guaranteed from their land means that this is a solid investment for those seeking exposure to rising precious metal prices.”

However, it’s been a bit of a mixed bag for Fresnillo shareholders, with the company’s share price falling significantly over the last five years. That said, it has staged a gradual recovery over the last 12 months and is currently trading above pre-pandemic levels.

Looking forward, Fresnillo continues to face headwinds from cost inflation and volatile metal prices. However, the company’s project pipeline could provide a boost to earnings if sites move from exploration into production.

The iShares Physical Gold exchange-traded commodity (ETC) aims to track the spot price of gold by holding the underlying asset in its physical form.

Alexander Watkins, passive investment analyst at Hargreaves Lansdown, comments: “The
iShares Physical Metals owns the underlying bullion and issues debt securities against the value of the metal.

“This provides the investors with pure physical metal exposure as the ETC is a note 100% backed by the physical asset.”

Mr Watkins also points to the fund being competitively-priced against its peers, with an annual charge (also known as ‘total expense ratio’) of 0.12%.

However, investors should be aware that fund returns can be volatile due to price changes in the underlying gold. It delivered a price increase of 20% in 2020, followed by a loss of 3% in the following year.

Overall, this fund provides a low-cost option for investors wanting to invest in gold without the challenge of owning the asset in physical form.

The Sprott Gold Miners ETF tracks the Solactive Gold Miners Custom Factors index, which is based on large-cap gold companies listed on Canadian and US stock exchanges.

Around three-quarters of the fund is invested in Canada, followed by around 20% in the US. Its largest holdings are Barrick Gold, Franco-Nevada and Newmont Corporations.

IG’s Joshua Mahony comments: “The Sprott Gold Miners ETF provides one investment vehicle to invest in larger businesses, with holdings largely focused on Canadian and, to a lesser extent US, names with strong revenue growth, elevated free cash-flow yields (free cash flow as a proportion of market capitalisation) and a low long-term debt-to-equity ratio.”

He also points to the benefit of investors looking for a diversified portfolio of investments in this sector: “Mining as a whole can be a highly volatile affair for investors, with any companies seeking company-changing discoveries also open to major volatility.

“Meanwhile small-cap mining stocks can bring particularly oversized returns, but there is a propensity for such junior stocks to deteriorate as costly exploration costs gradually drive increased dilution of the stock.”

Although less closely-tied to gold prices than funds investing in the underlying commodity itself, mining companies are still highly sensitive to changes in the price of gold. As a result, returns from this fund have been volatile, ranging from a 44% increase in price in 2019 to a 10% loss in 2021.

The VanEck Junior Gold Miners ETF invests in small gold miners, often in the early stages of exploration.

Over half the fund is invested in Canada, with around 20% invested in Australia. The top three holdings comprise Yamana Gold, Kinross Gold and Alamos Gold.

IG’s Joshua Mahony comments: “On the riskier end of the spectrum, the VanEck Junior Gold Miners ETF targets small-cap exploration firms, providing investors with a greater degree of diversification when approaching businesses that are hoping for that bumper discovery.

“These names will often see greater volatility around gold prices given their risk profile, with small-cap mining stocks often booming in a gold bull cycle given the implications that higher prices can have on their prospective earnings. This fund also represents the only junior gold miner ETF available in Europe.”

Investors should therefore be prepared for volatility in returns, with the fund increasing in price by 40% in 2019, followed by a fall of more than 20% in 2021.