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If Gold Prices Continue to Climb, These 3 Stocks Could Skyrocket

Gold bullion on a chart
Image source: Getty Images.

Written by Adam Othman at The Motley Fool Canada

The bullish momentum of gold as an asset has been building up for more than two years now if you disregard a few slumps on the way. But the prices have surged in the past few weeks, and the forecasts predict a further rise.

This has already caused several gold mining stocks (and royalty stocks) to spike, and if the momentum continues at its current strong pace, some of these stocks might skyrocket.

A century-old gold mining company

Newmont (TSX:NGT) is one of the oldest gold mining companies still in operation today (since 1921) and one of the largest based on market capitalization and output. It’s currently valued at $45.4 billion and had the highest global production in 2023.

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The company has 10 tier-one operations in multiple regions and massive reserves (128 million ounces). It’s also a major copper producer with significant reserves.

While its market valuation is impressive, it’s heavily discounted right now. The stock is trading at a price 35% lower than its 2022 peak. However, the trajectory has shifted since the end of February and has risen by over 31% since then. Assuming this momentum carries the stock to (or beyond) the peak it fell from, investors can amass excellent returns by investing in it now.

A Canadian gold mining giant

Toronto-based Kinross Gold (TSX:K) is among the top 10 gold producers around the globe. It has a diversified portfolio of operations and several projects spread out over three continents. This includes its two tier-one mines that account for over half of the company’s total output in any given year. Healthy valuation and high liquidity are among some of the fundamental financial strengths of this gold producer.

Kinross is a trusted dividend payer, and while its 1.8% yield may not look very impressive, it’s likely to shrink even more as the stock continues to go up at a robust pace of 33% in less than six weeks. Its market valuation is still about two-thirds of its 2022 peak level, so much “recovery” room may fuel the stock’s growth in the coming months.

A gold royalty company

Gold mining companies may offer investors the most direct exposure to the bull market trend the underlying asset is going through. But the same would be true during a trend reversal, and if this is something you are wary of, a gold royalty giant like Franco Nevada (TSX:FNV) might be the right pick for your portfolio.

As a gold royalty company, the exposure is a bit shielded, and this may be one of the reasons why this stock has been rising at a different pace than the other two. Over the same period, Franco Nevada only grew by about 14.7%. Still, it’s definitely moving in the right direction, and its long-term growth potential may be significantly more alluring than the other two.

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Foolish takeaway

Assuming the gold prices keep rising, the three stocks may reach new heights, and some of them may even go beyond the peak they achieved in 2022. This may lead to massive capital appreciation, and if you buy now when the stocks are still reasonably discounted, you would also lock in a relatively healthier yield, making the overall returns more impressive.

The post If Gold Prices Continue to Climb, These 3 Stocks Could Skyrocket appeared first on The Motley Fool Canada.

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Fool contributor Adam Othman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

2024