Gold has continued to hit new six-year highs and was trading at $1,544 per ounce as of August 29. The yellow metal has surged so far in 2019 in part due to global economic concerns like the U.S.-China trade war, record levels of negative-yielding debt globally and signs of manufacturing slowdowns in major economies – to name a few. Fear of uncertainty often drives investors to perceived safe haven assets, such as gold.
There are a number of ways to play the gold rally, including physical bullion, gold stocks and funds that invest in related securities. Is it too late to get in?
Not with gold mining stocks. As measured by the FTSE Gold Mines Index, gold miners are down 54 percent from their peak in 2011. Miners have been rising in 2019, but they would still have to jump a whopping 117 percent to reach their former record highs. This could be attractive to some investors and I think there’s strong upside potential.
Gold Producers Have Risen Along With the Price of Gold
Gold was up 20.06 percent year-to-date as of August 29. Sound impressive? Miners were up more than double that at 42.94 percent over the same period. Since miners’ margins are highly leveraged to the price of the metal they produce, these companies have historically appreciated alongside gold.
Looking at some of the larger gold stocks –SSR Mining, Wheaton Precious Metals and Centerra Gold – all were up significantly in the last 12 months as of August 29, but of course past performance is no guarantee of future results. SSR Mining has operations at all stages of development in the Americas and was up 83.82 percent. New York-listed Wheaton Precious Metals, which is actually a royalty and streaming company, was up 67.21 percent. Lastly, Centerra Gold was up an astounding 118.40 percent due to strong production results.
Junior miners have also seen performance far greater than that of physical bullion. Wesdome Gold Mines was up 122.56 percent while Lundin Gold was up 72.60 percent – both listed in Toronto.