As a safe-haven asset, gold is cherished and sought after whenever there is uncertainty in the market. This uncertainty can come from a number of sources – from economic meltdowns to geo-political tensions and even elections. This makes gold mining stocks ideal in specific scenarios because they might soar even when the market might be bearish or, in some cases, even crash.
The current stock market in Canada cannot be placed in this category. The TSX has been powerfully bullish this year and has risen by about 20% since the beginning. Gold has also experienced a powerful bull market phase during the best growth stretch; the prices rose by US$500 per ounce in less than six months.
After a dip in the last few weeks, gold prices are going up again. Whether you consider this a continuation of the original bullish phase or a new bull run, it may be worthwhile to keep an eye on some top gold stocks.
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A gold mining stock
Agnico Eagle Mines (TSX:AEM) is one of the largest gold producers in the world with operating mines in four countries. However, the bulk of its reserves (over 86%) are in Canada, most in Ontario and Quebec. It also has significant reserves in Mexico and relatively minor assets in Australia and Finland.
The gold miner has enough reserves for several decades of operations even if it doesn’t explore or acquire any other assets, considering the current production capacity. It has a solid dividend history, having paid dividends for over four decades and has been growing them for seven consecutive years.
The current yield is low at 1.8% but it can be chalked up to its compelling bullish run, which has pushed its value up by 60% since the beginning of the year.
The momentum is waning, and the stock is already quite overpriced. However, if the gold prices keep going up, it might allow the stock’s bullish momentum to carry into the following year, in which case, you can accumulate some good returns.
A gold royalty and streaming stock
Even though gold mining stocks offer the most direct exposure to the underlying metals, a royalty and streaming company like Franco-Nevada (TSX:FNV) might be a more compelling gold stock for its performance and an additional layer of safety.
That layer of protection comes from investing in gold operations instead of running them and holding the assets directly – a business model that’s highly dependent on the price of the metal.
This is at least one of the reasons behind this stock’s different performance. It rose by about 14% throughout the year and is currently trading at an 11% discount from its yearly peak. From a dividend perspective, it’s even less attractive because of the 1.1% yield, but it has a more compelling dividend history – 15 consecutive years of growth. Its long-term performance history is far more impressive as well.
Foolish takeaway
If you are going to leverage the current momentum for a short-term holding, Agnico might be a more practical choice, especially if gold prices keep going up. But for a long-term holding, Franco-Nevada might have more of an edge, especially if you are comfortable holding it for decades, not just years.
