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Investing in Gold stocks can be one of the best ways to invest in gold that you can find because the companies who issue these stocks have a direct stake in gold mining, storage or holdings.
Where can I invest in Gold Stocks
The best way to invest in gold stocks is through a regulated stockbroker like Robinhood (If you want to know how to buy gold stocks on Robinhood we have a tutorial for that). Here you can find a brief list of the best regulated stockbrokers there are to invest in gold stocks:
Take into consideration the commissions and feed you will pay as well for holding Gold ETFs if you decide to invest in one of these financial instruments because they pay a small operating fee for holding the asset, and the way a gold ETF is taxed is also very different from gold stocks.
Best Gold Stocks
In this section we will go over what the best gold stocks are for us after having thoroughly analyzed each one of them on the list.
We have two major categories of gold stocks we will list below: 1) Gold Royalties and streams stocks and 2) Gold Mining stocks.
Both types of companies make money off gold very differently from each other as mining companies directly rely on the supply demand and price of gold and the Royalty gold stocks are more reliant on their royalty stake and asset management rather than just mere supply and demand in comparison to individual mining companies.
Both types of companies are a great investment depending on what your individual goals as an investor are and what type of market conditions you want to take advantage of when buying shares in these companies.
Best Gold Royalty and stream stocks
Franco Nevada Crop. (FNV)
Franco Nevada is a favorite among gold investors not only because Franco Nevada has the world’s largest portfolio of cash flow producing assets but also because of their massive gold reserves and their unbeatable stock track record on the market.
INVEST FRANCO NEVADA STOCK AFFILIATE LINK BUTTON
Stock overview
Franco Nevada operates a gold-focused royalty and streaming company focused mainly in Latin America, The United States and Canada.
They own 404 assets across the globe, they are diversified in many different stages of operations from already producing assets to exploration. Their market caps also vary from small to large.
Franco-Nevada has been one of the best performing gold stocks in the gold industry with a 16% compound growth rate since 2007, outperforming the S&P500, Gold Index ETF and other important indexes.
The company’s market cap stands at $27.6 Billion dollars, making it the 3rd largest gold company in the world after only Barrick Gold and Newmont.
Financial Ratios
In this section of this brief stock analysis, we will analyze Franco-Nevada’s financial ratios to understand where this stock stands in regard to financial health and overall performance.
PE RATIO
Franco-Nevada has a PE ratio of 36; this number reflects a healthy ratio between the stock’s overall price and its earnings.
Keep in mind that for industrial/financial sector stocks an ideal PE ratio is between 25 and 50 so Franco-Nevada ticks off a green box regarding this ratio.
BETA
It is important to look out for a stock’s beta be it if you want to buy the stock as a hedge against the market or the opposite.
Usually, when a stock has a beta of 1 or higher, it means that the stock will be more sensitive to the stock market’s moves.
On the contrary, when a stock’s beta is lower than 1, it means that the stock is less sensitive to the stock market’s move.
Franco-Nevada’s beta is 0.6 which tells us that this stock is relatively insensitive to stock market volatility, so this would be a great addition to a well-balanced gold portfolio if you want to invest in a gold stock that is not too sensitive to stock market’s fluctuations.
EPS ratio (Earnings Per share)
This is another important ratio we need to look out for when analyzing a stock to make an investment decision.
A higher EPS ratio generally means that investors get a higher return on investment per share, it is a profitability ratio, so again, the higher a company’s EPS, the more profitable it’s considered to be.
In this case, Franco Nevada’s EPS ratio is $3.96 per share which is considered to be on the high side when compared to other gold mining stocks and even some tech stocks.
For example, NVIDIA’S EPS was $3.09 per share, which makes Franco Nevada’s EPS even higher than some tech stocks.
Although EPS ratio can be a confusing ratio for beginner investors a good rule of thumb is to avoid negative EPS and compare the stock’s PE ratio to other EPS ratios on the same industry and even going outside of the industry to see some big company’s EPS to determine the health of your stock’s EPS.
Dividends
Yet another controversial financial indicator. Some investors like Warren Buffet argue that they don’t like a company that pays dividends simply because that is money that could’ve been reinvested into the company itself.
Here at Montknoll however, we disagree. We think that for the individual investor, a company that pays higher dividends will not only give us a better ROI, but it also indicates the company’s underlying ability to pay more to its investors, which in turns really reflects a company’s good financial health.
Franco Nevada’s dividend yield is 0.90% which is not impressive compared to other stocks, but is a good yield nonetheless.
Right now, franco Nevada pays $1.28 for every share you hold or the equivalent of 0.9% of your holdings in the company with a current stock price of $144.07.
Ways to invest in Franco-Nevada Corp.
You can invest Franco-Nevada Corporation stock through regulated stockbrokers like the ones we’ve listed above or through here:
INVEST IN NEWMONT CORP AFFILIATE LINK
Best Gold Mining Stock
Newmont Corp. (NEM)
Newmont is the world’s leading gold producer and a producer of various other metals like copper, silver, zinc and lead. This company has a huge portfolio of assets but focuses mainly on favorable mining jurisdictions in North America, South America, Australia, and Africa.
Newmont was founded in 1921, has been publicly traded since 1925 and has outstanding performance in the gold industry with its stock price reflecting such value.
Stock overview
Newmont holds mainly mining operations focused on gold but has recently expanded into copper mining and various other metals as well. Newmont holds 14 major mining operations around the globe with its main focus being in north and south America.
Newmont has been one of the longest standing gold mining companies in the world, being reliable and constantly expanding into new, prospective markets the company continues to go strong after almost 100 years in operation.
The company’s market cap is $37.4 billion dollars as of 2022, making it the largest gold company in the world. Just below Newmont are Barrick Gold and Franco-Nevada Corp.
Financial Ratios
Now we will go over the company’s critical financial ratios to better understand this stock’s financial health and overall performance.
PE RATIO
Newmont has a PE ratio of 38; this number signals a healthy price to earnings ratio. This number show optimal performance with regards to earnings and price action of the stock.
Keep in mind that for industrial/financial sector stocks an ideal PE ratio is between 25 and 50 so Newmont has great PE ratio for its industry.
BETA
Newmont’s beta is 0.29 which tells us that this stock is relatively insensitive to stock market volatility, so this would be a great addition to a well-balanced gold portfolio if you want to invest in a gold stock that is not too sensitive to stock market’s fluctuations.
A higher EPS ratio generally means that investors get a higher return on investment per share, it is a profitability ratio, so again, the higher a company’s EPS, the more profitable it’s considered to be.
In this case, Newmont’s EPS ratio is $1.22 per share which is still on the positive side but not quite as good as other gold mining stocks.
Dividends
Newmont has a dividend yield of 4.74% which is a really high yield, especially compared to other stocks in the gold mining sector.
Right now, Newmont $2.20 for every share you hold or the equivalent of 4.74% of your holdings in the company with a current stock price of $47.15 per share.
Ways to invest in Newmont Corp.
You can invest in Newmont Corporation stock through regulated stockbrokers like the ones we’ve listed above or though here:
INVEST IN NEWMONT CORP AFFILIATE LINK
There are many great gold stocks out there so we recommend you do your own research as well as check out this article on the Largest God Mining Stocks, we have compiled a list of the largest market cap – best performing gold stocks out there.
Should I invest in Gold stocks?
| Pros of investing in Gold Stocks | Cons of investing in Gold stocks |
| No storing costs associated with owning gold stocks. | There can be extra costs associated with buying, selling and holding gold stocks as an investment, particularly gold ETFs as they pay a small management fee. |
| Gold stocks are more liquid compared to gold bullion because you can buy or sell them with the click of a button. | You are exposed to financial default of the institution you are holding your stocks with, to eliminate this risk if you want to hold gold long-term we do recommend you invest in gold bullion instead. |
| Gold stocks pay less taxes than physical gold or even gold ETFs because they are considered securities and thus pay a maximum capital gains tax of 20%. | Gold stocks can be more vulnerable price volatility because some stocks like gold mining stocks do rely heavily on gold prices to keep themselves profitable. |
Investing in gold stocks can be a great way to diversify your investment portfolio, but you must be aware of the risk investing in gold stocks (or any other financial instrument) entails.
Diversifying your portfolio with different types of gold stocks can be a good way to protect yourself from price volatility so that when prices for one type of investment decline, prices for others will be rising.
Before investing in gold stocks or in a gold-backed fund, make sure it fits with your investment strategy, financial goals and risk tolerance.
Gold ETFs
Gold ETFs buy physical gold on the investor’s behalf. In other words, the ETF you buy may own gold in a vault in Switzerland, but you can be in the U.S. and buy or sell that gold ETF with the click of a button from your living room.
Should I invest in Gold ETFs?
| Pros of investing in Gold ETF’s | Cons of investing in Gold ETF’s |
| Gold ETFs are highly liquid, which means you can buy or sell your gold ETF given the market is open. | Gold ETFs pay a small management fee to keep operating, this fee will be taken from your portfolio’s equity. |
| Gold ETFs provide a way to invest in actual physical gold without having to own the underlying asset and thus reducing the risks that come with owning physical gold. | Gold ETFs are taxed the same way physical gold is taxed, meaning that you will pay a 28% capital gains tax instead of the 20% for stocks and other securities. |
| Gold ETFs directly track the price of gold, so there are no more risks associated with investing in gold ETFs other than price volatility. | Gold ETFs are much more vulnerable to gold price volatility because they are directly backed up by the asset. |
Ways to invest in Gold ETFs
Some of the popular gold ETFs that trade in the U.S. stock market are:
- SPDR Gold Shares ETF (GLD)
- iShares Gold Trust ETF (IAU)
- SPDR Gold MiniShares Trust (GLDM)
- Aberdeen Standard Physical Gold Shares ETF (SGOL)
- GraniteShares Gold Trust (BAR)
- VanEck Merk Gold (OUNZ)
Gold ETFs can be bought through a brokerage. Many online brokerages and investment apps let you buy popular gold ETFs traded in the U.S. such as GLD, IAU, and GLDM, here are some options for you:
Gold Mutual Funds
Gold mutual funds work similar to gold ETFs, but instead of owning only physical gold, Gold mutual funds pool money from multiple investors and manage it on your behalf, typically investing in gold mining or refining companies’ stocks, or even on physical gold bullion as well.
Mutual fund feed tend to be higher than those of ETFs because they’re usually actively managed, meaning there’s a fund manager or team of people conducting research, analyzing potential investments and then making investment decisions for the fund.
Should I invest in Gold Mutual funds?
| Pros of investing in Gold Mutual Funds | Cons of investing in Gold Mutual Funds |
| You don’t have to research individual gold mining companies | Mutual funds charge different fees, and said fees are usually higher than those of Gold ETFs |
| Highly liquid and can be bought easily through a brokerage. | The value of gold mutual funds can be more volatile than physical gold |
| Highly diversified investment in the gold markets | You cannot control what securities are bought and sold in the fund. |
Ways to invest in Gold Mutual funds
Some of the gold mutual funds that trade in the U.S. stock market are:
- Sprott Gold Equity Fund (SGDIX)
- Franklin Gold and Precious Metals Fund (FKRCX)
- Gabelli Gold Fund Class AAA (GOLDX)
- Invesco Gold and Special Minerals FD (OPGSX)
- US Global Investors and Prec Mtls Fd (USERX)
- First Eagle Gold Fund (SGGDX)
- Van Eck International Investors Gold Fund (INIVX)
- USAA Precious Metals and Minerals Fund (USAGX)
- Fidelity® Select Gold Portfolio (FGDAX)
The easiest and safest way to invest in gold mutual funds is through a regulated brokerage. Here are some options for you:
Gold Mutual Funds vs Gold ETFs and Stocks
| Gold Stocks | Gold ETFs | Gold Mutual Funds |
| Low tax bracket | Higher tax bracket | Lower tax bracket |
| Can be less sensitive to gold price action | Gold price action and ETF performance is the same | Highly sensitive to gold price action |
| Moderately depending on the stocks sector | Not diversified as the only asset is gold | Highly diversified, mutual funds invest in various assets. |
These are the main differences between these 3 gold assets you can buy. As you can see we have basically created 3 criteria in order to judge them: 1) Tax brackets, 2) Volatility with regards to gold and 3) Diversification.
Take into account these 3 criteria in order to make a well informed investment decision that will protect you from risk and maximize your return on investment.
Gold portfolio diversification
Gold prices can be highly volatile on the short term, but they tend not to move in tandem with the overall stock market or bond prices.
For example, when the S&P500 had a fall of 30% during the 2008 financial crisis, the price of gold was up by nearly that same amount.
This makes owning some gold stocks alongside gold bullion and other gold investments, a way to diversify your investment portfolio.
Just keep in mind that most financial advisors typically don’t recommend investing more than 10-20% of your overall assets in gold.
If you want to know if investing in gold during a recession is risky we recommend you check this article out
Summary on How to invest in Gold Stocks
- Gold investments are considered a hedge against inflation. However, there are risks you should consider carefully before deciding which is the best option to diversify your portfolio and investment strategy.
- Gold ETFs can be bought through a brokerage. Many online brokerages and investment apps let you buy popular gold ETFs traded in the U.S. such as GLD, IAU, and GLDM.
- Most financial advisors recommend not investing in more than 20% in gold.
- Mutual funds can also own gold bullion and invest in gold mining stocks on your behalf. Some gold mutual funds are SGDIX, FKRCK, GOLDX and OPGSX.
- Gold ETFs are not considered securities and thus pay a 28% capital gains tax, while gold stocks capital gains tax is capped at 20%.
- The best gold stocks include FNV and NEM.
Bottom Line
Investing in gold stocks is a great way to diversify your gold portfolio and there are many types of gold stocks and other financial instruments you can buy to invest in gold be it directly buying physical gold through an ETF or having a more diversified investment strategy buying a gold mutual fund or even investing in gold online, there are always different methods out there.
Either way, always consider the risks associated with investing in gold stocks and gold overall to make the best investment decision for your own goals.
We hope this article helped you, for more information on investing in precious metals, commodities, and jewelry we kindly ask you consider visiting our home page.
