Gold price has continued to surge this year, becoming the best-performing major asset. It has soared by almost 30% and is nearing the important resistance point at $3,500. Analysts have boosted their gold forecasts, with Goldman Sachs estimating that it will hit $3,700. Some pros anticipate that gold will hit as high as $4,000 this year.
Gold’s performance is a boon to companies and exchange-traded funds (ETFs) in the industry. This article looks at some of the best gold stocks and ETFs to buy and hold as the rally intensifies.
Wheaton Precious Metals is the best gold stock to buy because of its business model. This explains why the stock has jumped by 51% this year and 145% in the last five years, outperforming gold itself.
WPM is a leading player in the gold industry, despite not engaging in mining itself. Instead, it owns rights to gold mines and earns revenue from the rights holders. This ensures that it is a high-margin company since it does not need many employees.
For example, Wheaton made over $1.28 billion in annual revenue last year and a net profit of over $552 million. It then uses these profits to pay its shareholders and acquire more rights to gold mines.
This business model explains why Wheaton Precious Metals always trades at a premium compared to other companies. It has a forward P/E ratio of 41, higher than popular growth companies like NVIDIA and Microsoft.
Franco Nevada is another good quality gold stock to uy and hold. Like Wheaton, the company does not do the heavy lifting. Instead, it finances gold mining companies in exchange of royalties. This is a good business model as it ensures that it does not spend a lot of money in wages and other operating expenses.
Franco-Nevada is also a high-margin company. It generated over $1.1 billion in annual revenue last year and a net income of $552 million. This revenue will likely keep going up because of the soaring gold prices.
Franco-Nevada also trades at a premium, with its forward P/E ratio standing at over 40. This valuation is justified by its strong business performance and its history of returning funds to shareholders.
Royal Gold is also one of the top gold stocks to invest in today. Like the other two, it is in the streaming and royalty industry, where it offers exposure to gold without operating the mines.
Royal Gold is a bit smaller than Wheaton and Franco-Nevada. It generated $712 million in revenue last year and a net profit of nearly $350 million, resulting in a margin of nearly 50%.
Royal Gold’s stock price has surged by over 56% in the last 12 months. It is also cheaper than the other two as it has a P/E multiple of 28, lower than the other’s 40%.
ETFs are also a good approach for investing in gold and capitalizing on its strong rally. The two most popular gold ETFs are the SPDR Gold Shares (GLD)and iShares Gold Trust (IAU).
Since these ETFs are the same, it makes sense to buy IAU because of its cheaper expense ratio of 0.25%, which is cheaper than GLD’s 0.40%. That 0.15% spread can add up over time.
Some analysts recommend investing in gold mining ETFs like the VanEck Vectors Gold Miners ETF (GDX), Sprott Gold Miners ETF (SGDM), and iShares MSCI Global Gold Miners ETF (RING).
