While it may be odd to start a list of best gold stocks to buy now with a caveat, investors ought to know that the narrative for precious metals is extremely risky. At the same time, contrarianism tends to be very profitable as fewer people are looking at the target trade. Therefore, once the public gets wind of the bullish opportunity, the wave comes in, driving up the sector to potentially ridiculous heights.
That’s the optimistic thesis. In reality, investors must have incredibly strong conviction to take a dip in the precious metals sector, even with the so-called best gold stocks to buy now. At the moment, a strong U.S. dollar index buoyed by the Federal Reserve’s commitment to killing inflation has imposed an ugly environment for gold and other commodities.
Nevertheless, two factors bolster the case for the best gold stocks to buy now. First is the fear trade. What I mean is that with economic and geopolitical scourges going all biblical on everybody, there’s a lot of fear in the air. In turn, precious metals historically have been a safe haven.
Second, the Fed can always go too far. Remember, money velocity is down near all-time lows, which is ultimately deflationary. A monetary course reversal could then bolster these best gold stocks to buy.
Gold Stocks to Buy: Newmont (NEM)
Commanding the largest gold reserve base in the industry per its website, Newmont (NYSE:NEM) represents an obvious choice for the best gold stocks to buy. The proof is in the pudding. Despite rough seas in the spot price of the yellow metal, NEM shares are only down about 1% on a year-to-date basis. At its peak, it was up 40% year-to-date (or YTD), suggesting that this might be a great discount to consider.
Fundamentally, one of the factors that support NEM as a long-term play among the best gold stocks to buy is that it’s not just levered to precious metals. Newmont mines a considerable amount of copper every year, an already relevant commodity that’s becoming even more significant. For instance, copper plays a significant role in the manufacturing of electric vehicles.
Another factor to consider for NEM is its passive income potential. Currently, the company has a forward yield of 3.67%, whereas the average yield for the materials sector is 2.82%.
Agnico Eagle Mines (AEM)
A Canada-based senior gold mining firm, Agnico Eagle Mines (NYSE:AEM) features production activities in Finland and Mexico, along with its home market. In addition, Agnico’s exploration and development activities extend to the U.S.
Interestingly, Agnico distinguishes itself from the other best gold mining stocks to buy with its longstanding policy of not selling any of its future gold production forward. For clarification, a gold forward contract is a transaction in which two parties bilaterally agree on the purchase and sale of gold at a future date.
Further, many analysts consider AEM to be one of the best gold mining stocks to buy for its robust financials. The company has solid strengths in its balance sheet and as a better highlight, provides a compelling profitability picture. For example, its return on equity (ROE) is nearly 6.5%, whereas the industry median has currently slipped into negative territory.
Finally, Agnico Eagle pays a forward yield of 3.54%, which again is notably higher than the materials sector average.