May 12, 2022
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According to Wells Fargo, the rest of 2022 looks good for the price of gold.
Thanks to hot inflation, geopolitical uncertainty and a crashing stock market, the banking giant sees gold as the next big opportunity for investors — particularly in relation to bitcoin.
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"On the store-of-value front, bitcoin has been getting much of the attention lately, but we think gold may be the next play,” Wells Fargo’s head of real asset strategy John LaForge says. “Gold's price chart appears to be slowly grinding higher, while bitcoin's price has been stuck in a wide $30K to $69K range for the past 12 months.”
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Wells Fargo believes that bitcoin has gold beat in ease of use, storage, and verifiability, but gold’s physical nature and universal recognition still make it a popular safe-haven asset.
"The bottom line is that we still like gold and are maintaining our 2022 year-end target price range of $2,000-$2,100 per ounce.”
Here are three gold stocks to play that bullish gold outlook.
Barrick Gold (GOLD)
Barrick Gold is a $37 billion sector-leading gold company. It operates mines in 18 countries across the world with a focus on high-margin, long-life assets.
Barrick’s Q1 results reflect that asset quality, as well as the company’s success in driving profitability and shareholder value. During the quarter, free cash flow clocked in at $393 million. On the strength of those results, Barrick doubled its quarterly dividend.
The stock currently offers a dividend yield of 1.9%.
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Gold Fields (GFI)
Gold Fields is a South African gold producer with a market cap of $12 billion. The company has total annual gold-equivalent production of 2.2 million ounces and gold-equivalent mineral reserves of 52.1 million ounces.
Gold Fields’ operating efficiency is high and while the stock’s price multiples are low — a nice combination for prospective investors.
In 2021, the company achieved a return on equity of 20% and generated adjusted free cash flow of $463 million. This performance is tied to the high quality of the company’s asset base, as well as solid execution by management.
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Meanwhile, the stock looks relatively inexpensive. Currently, it sports a P/E of 12 and offers a dividend yield of 2.8%.
Agnico-Eagle Mines (AEM)
Gold companies often operate in politically unstable regions of the world. This political risk can outweigh any “safe-haven” benefits gained from investing in gold. If you don’t want to take on this added uncertainty, consider Agnico-Eagle Mines.
Agnico is a Canadian senior gold company with a market cap of $23 billion. It boasts operations in relatively stable countries including Canada, Finland and Mexico.
In 2021, the company posted record annual gold production, record annual operating cash flow of $1.3 billion record mineral reserves. Agnico also extended its impressive dividends-paid streak to 38 consecutive years.
Currently, the stock offers a dividend yield of 3.0%.
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Karen Thomas, CFA, is a freelance contributor to Moneywise.
