Precious metals stocks have been on fire over the last few months, and you don’t have to dig deep to know why. Essentially, investments like gold and silver represent safe-haven assets during times of uncertainty or turmoil. With the raging U.S.-China trade war, along with multiple geopolitical flashpoints, there’s plenty of both descriptors to go around.
Primarily, one of the biggest catalysts for precious metals stocks to buy is the inversion of the yield curve. Specifically, the yield for the longer-maturing 10-year Treasuries dipped below the yield of the shorter-maturing 2-year Treasuries. Therefore, what we have is a nonsensical economic condition: a riskier (based on time exposure) asset offers less reward than a more stable or predictable one.
That kind of circumstance invites investor fears, which is bullish for precious metals stocks to buy. However, what could really send this commodities sub-segment to the moon is the Federal Reserve’s response.
Naturally, the central bankers don’t want this circumstance to continue; otherwise, no one in their right minds would buy 10-year Treasuries. First on the Fed’s agenda is to flatten the yield curve. And at this point, that can only be accomplished by cutting benchmark interest rates further. Theoretically, this should drive down the 2-year Treasures’ yield below the 10-year bonds.
But will this work? I’m not a central banker so I’m not an expert on this topic. But what I do know is that such actions are inflationary. And based on the present fiscal and economic circumstances, this is the only lever the Fed can pull.
In layman’s terms, gold and similar commodities will moon. Thus, here are eight precious metal stocks to consider.
Barrick Gold (GOLD)
Precious metal stocks such as Barrick Gold (NYSE:GOLD) have certain risks that the underlying physical bullion markets do not; namely, the human element. Therefore, it pays when loading up on commodities-based stocks to buy to consider a heavier allocation toward established, stable names. With a long history and a market capitalization nearing $34 billion, GOLD stock certainly qualifies.
Aside from its sheer size, what I like about Barrick is its quality of international exposure. Although geopolitical risks in their African projects exist, for the most part, the mining company is exposed to stable administrations. We’re talking names like Canada, Chile, Australia, and the U.S.
Plus, GOLD stock is bringing home the goods for stakeholders. On a year-to-date basis, shares have jumped over 46%. And since the beginning of June, they’re up 51%.
Ordinarily, I’d avoid such technically hot assets. However, GOLD stock is likely riding on unprecedented series of fundamental tailwinds.
Newmont Goldcorp (NEM)
Many investors understandably avoid precious metals stocks because of the reputation of speculative mining projects. But like any sector, it’s the quality of the individual company that matters. And with Newmont Goldcorp (NYSE:NEM), you have the provenance of nearly a century of experience. Thus, even if we see the return of a bear market in the metals, NEM stock will probably stick around.
But I’m almost certain that such pessimism is far out into the future. For the near-to-intermediate term, Newmont Goldcorp should attract significant investor dollars. On a YTD basis, NEM stock has gained over 16%. That may not sound like much until you consider that since the beginning of May, shares have jumped nearly 35%.
Moving forward, I see strong gains ahead despite the already impressive performance. The majority of Newmont Goldcorp’s projects are located in the stable regions of North America and Australia. Four projects are in South America, while only two are levered to Africa. Therefore, even if geopolitics rears its ugly head, NEM stock should find significant insulation.
Agnico Eagle Mines (AEM)Another top name to add to your list of precious metals stocks to buy is Agnico Eagles Mines (NYSE:AEM). While some of the top-tier miners have some exposure to geopolitical risks, AEM stock is arguably almost completely insulated. I say this because Agnico Eagles has mining projects only in Canada, Finland, and Mexico. None of these countries strike me as dangerously unstable.
But what really stands out about AEM stock is that the underlying company does not engage in forward gold sales. Forward sales are commonly used in sectors like commodities to help businesses predictably flatten the target assets’ volatility. However, with Agnico Eagle, the eschewing of forward gold sales is a long-standing policy. Thus, buying AEM stock gives you full exposure to the gold spot price.
In prior years, that was a raw deal. But at this juncture, this is exactly what you want. Already, the gold price has shot up over $1,550. Just a couple months ago, it was under $1,300. And with nothing indicating a headwind to this run, AEM stock gives you cheap exposure to the yellow metal.
Royal Gold (RGLD)Although it’s an incredibly hot name right now, Royal Gold (NASDAQ:RGLD) is an interesting play. And in my opinion, RGLD stock still has significant upside remaining.
Most precious metals stocks to buy in the mining sector are risky because of the unknown. This is especially true for companies specializing in gold exploration: sometimes you hit pay dirt, and sometimes you don’t. Because of the unpredictability involved, these investments can be incredibly volatile. But with RGLD stock, the underlying company mitigates the wildness through its streaming business model.
Instead of actively mining for metals, Royal Gold instead has streaming and royalty agreements with miners. Typically, a company like Royal Gold will pay an upfront fee in exchange for future deliveries of a particular asset.
Because of this inherent risk mitigation, RGLD stock has outperformed many other physical mining-centric organizations. For instance, on a YTD basis, RGLD shares have skyrocketed nearly 61%. With bullion markets likely headed higher, Royal Gold might still be a bargain.
Wheaton Precious Metals (WPM)If you’re looking to precious metals stocks for protection in the markets, it’s natural to only focus on gold. However, as my sit-down with commodities expert David Morgan illustrates, silver has tremendous potential right now. As proof, since my interview with the godfather of silver investing, the target metal has shot up over 18%.
Of course, the silver spot price is more volatile than gold. But if you want exposure to this exciting metal but with some risk mitigation, consider Wheaton Precious Metals (NYSE:WPM). Formerly known as Silver Wheaton, WPM stock is no longer just a pure-play silver equity. However, the company still enjoys one of the biggest silver streaming businesses in the world.
As I mentioned above for Royal Gold, WPM stock is intriguing for this streaming model. Unlike every other mining outfit, Wheaton doesn’t have the associated onerous overhead costs. Management knows what their outlays are because they are negotiated ahead of time. That’s a huge plus for WPM stock because pure miners operate under a cloud of uncertainty.
First Majestic Silver (AG)
In my view, silver is the cryptocurrency of precious metals stocks to buy. Although it has the same monetary fundamentals as gold – silver was at one point “real money” – it also seems to have a mind of its own. Nevertheless, for me, the outsized potential for silver is enough to accept the risks. If you have a similar mindset, you should take a look at First Majestic Silver (NYSE:AG) and AG stock.
For starters, First Majestic Silver lives up to the hype of precious metals stocks levered to the white metal. Since January’s opening price, AG stock has soared over 91%. And since the beginning of August, First Majestic shares have popped up over 14%.
As I’ve mentioned with the other sector players, I don’t like to engage such strong momentum. But I keep going back to the Federal Reserve’s inability to do anything but cut interest rates. That’s inflationary for gold and should be exponentially so for silver.
Finally, on a fundamental note, First Majestic primarily focuses on Mexico’s mining market. Close to home and a vital U.S. trading partner, I don’t foresee major problems there. Therefore, AG stock also provides some measure of geopolitical insulation.
Sibanye Gold (SBGL)
Sibanye Gold (NYSE:SBGL) has significant operations in South Africa, which is both a blessing and a curse. Obviously, South Africa is exceptionally endowed with natural resources, including multiple robust gold mines. That naturally bodes well for SBGL stock. But on the flipside, the country’s class and race dynamics have caused substantial conflicts, including mining-related labor strikes.
Recently, such strikes over job losses and pay cuts have negatively impacted Sibanye Gold. As a result, SBGL stock hasn’t seen the explosive returns that other precious metals stocks have witnessed over the past few weeks. Nevertheless, Sibanye has serious potential, as judged by its explosive YTD return of over 110%.
Now, you might say that among this sector’s stocks to buy, superior options exist. However, very few companies have the kind of robust exposure to the other precious metals, platinum and palladium. In particular, palladium is an incredibly rare commodity and Sibanye is the world’s second-largest producer of it. Thus, I like my chances with SBGL stock.
Norilsk Nickel PJSC (NILSY)
I’m going to be completely blunt: Norilsk Nickel PJSC (OTCMKTS:NILSY) is a ridiculously speculative name among precious metals stocks. Therefore, I wouldn’t buy NILSY stock unless you fully understand that you’re taking a gamble. Even then, I wouldn’t allocate all of my “stupid” money on Norilsk.
With these caveats out of the way, I’m still very intrigued with the potential upside opportunity in NILSY stock. Russia has the largest stockpile of palladium in the world. As such, Norilsk Nickel is the world’s top producer of this rare commodity.
Why am I so big on palladium? First, it’s incredibly rare. Up until recently, one troy ounce of palladium was worth more than the equivalent size of gold. And while the yellow metal is on a run due to global economic fears, palladium still has a chance to regain its crown.
That brings me to my second point: palladium has multiple uses and should be a relevant commodity in the 21st century. The metal is both resilient to atmospheric influences and is extremely ductile. These properties lend themselves to high-tech usage, which is why I’m even considering NILSY stock.
As of this writing, Josh Enomoto is long the physical precious metals mentioned in this story.