You don’t need much to understand the incentive for gold stocks to buy. Just open a newspaper (or a news app for the modern audience).
First and foremost, ongoing geopolitical flashpoints represent a cynical catalyst for the safe-haven asset class. While tensions appear to have cooled between Israel and Iran, all it takes is one miscalculation before circumstances spiral out of control. Further, the conflict in the Middle East may only be beginning as the world puts a spotlight on Israel’s military campaign against the Hamas terror group.
Of course, we can’t forget about the current crisis in Ukraine. With critical aid passing in the House of Representatives, the U.S. government effectively sent the message that America and the west will not back down. That’s only going to embolden the Russians in their destabilizing territorial ambitions. About the only investment-related positive here is that gold stocks will likely rise.
Finally, we have monetary policy. With inflation continuing to be sticky, we just don’t know what economic conditions and the Federal Reserve will dictate. Chances are, if the labor market continues booming, prices will continue their ascent. That’s yet another reason to consider these gold stocks, arranged from large-capitalization firms to small.
BHP (BHP)
Smartphone with BHP Group logo in front of BHP website. BHP stock.
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When it comes to gold stocks, it might make sense to kick things off with a well-rounded player in the basic materials industry. Here, BHP (NYSE:BHP) offers an intriguing angle because it doesn’t just cover the safe-haven asset. Instead, the company extracts myriad other metals, including copper, zinc, molybdenum and one of the hottest assets right now, uranium.
Let’s face it – basic materials can be a volatile sector. Sometimes, it’s just good policy to have a diverse player in your portfolio. With BHP, you have a wide range of pertinent commodities that can keep the lights on. And while the average price target doesn’t reflect it, the overall analyst consensus view of moderate buy does.
Now, part of the reason why expert price targets reflect downside risk has to do with sales forecasts. For example, analysts anticipate fiscal year 2026 sales to come in at under $53 billion. That implies a reversal of sentiment. However, I anticipate that these projections need a rethink. If inflation worsens, the value of key commodities – which are priced in dollars – will need to rise to reflect reality.
Royal Gold (RGLD)
Gold bars and Financial concept, studio shots. Costco's gold bars, cost stock
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One of the biggest gold stocks available, Royal Gold (NASDAQ:RGLD) also happens to be one of the most distinct. Per its public profile, Royal acquires and manages precious metal streams, royalties, and related interests. Specializing primarily in royalties, this business model involves providing upfront capital to miners. In return, the company providing the capital gets a share of the revenue generated.
Fundamentally, one of the key advantages of a royalty model is pricing predictability. With a pure-play miner, you just don’t know what you’re going to get. However, with a royalty firm, the core contract is known upfront. Therefore, Royal Gold carries the advantage of being relatively more predictable than other gold stocks. However, upside is also limited – per the contractual relationship – so there is a downside to the arrangement.
Still, with the historical volatility of gold stocks, it makes sense to have a royalty specialist among your holdings. Further, analysts anticipate big things for the company. For the current fiscal year, they’re anticipating earnings per share of $4.26 on revenue of $697.71 million. That’s up from last year’s results of $3.53 EPS on sales of $605.72 million.
Hecla Mining (HL)
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One of the larger enterprises among gold stocks to buy, Hecla Mining (NYSE:HL), together with its subsidiaries, provides precious and base metal properties in the U.S., Canada, Japan, Korea and China. Per its corporate profile, Hecla mines silver, gold, lead and zinc concentrates. It also provides carbon material containing silver and gold for custom smelters, metal traders and third-party processors.
As a pure-play mining enterprise, Hecla will invariably carry higher risk compared to royalty or streaming companies. A streaming enterprise is similar to royalty firms except that it takes a cut of the actual production rather than revenue. Still, in exchange for the risk of being a pure-play miner, HL stock enjoys higher upside potential. Analysts rate shares a consensus strong buy with a $6.83 price target. And the high-side target stands at $10.25.
For the current fiscal year, covering experts anticipate EPS of 1 cent on revenue of $809.73 million. That’s a significant turnaround from a loss per share of 1 cent on sales of $720.23 million. In fairness, analysts are projecting sales growth decline in fiscal 2025 but this forecast likely requires a rethink given present circumstances.
Coeur Mining (CDE)
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Headquartered in Chicago, Illinois, Coeur Mining (NYSE:CDE) explores precious metals in the U.S., Canada and Mexico. According to its public profile, Coeur primarily explores gold, silver, zinc and lead properties. It also markets and sells its concentrates to third-party customers and smelters via off-take agreements. It’s one of the mid-tier enterprises among gold stocks in terms of relative size.
As an upstream specialist, heightened risk exists for CDE stock. In addition, shares have recently witnessed a surge in market value between late March through early April. Therefore, the average price target among covering experts of $4.51 implies downside risk. Even the high-side target of $5.40 may be disappointing to onlookers.
However, the lack of resoundingly bullish coverage could be an attractive contrarian opportunity for gamblers. In particular, Coeur is forecasted to incur a loss per share of 2 cents. While the bottom line is red, it’s a much better print than last year’s loss of 23 cents.
Further, sales projections call for a consensus $962.1 million. That’s up 17.2% from 2023’s haul of $821.21 million. That’s fairly significant compared to other gold stocks, making CDE a worthwhile idea.
DRDGOLD (DRD)
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Based in resource-rich South Africa, DRDGOLD (NYSE:DRD) is a mining firm engaged in the surface gold tailings retreatment business. It’s also involved in exploration, extraction, processing and smelting activities. To be sure, this subsegment of the basic materials ecosystem carries higher-than-average volatility risks. Nevertheless, as the fear trade kicks into high gear, DRD stock warrants a closer examination.
To be upfront, DRDGOLD represents one of the smaller enterprises among gold stocks. To reflect this point, DRD only features one analyst’s coverage, H.C. Wainwright’s Heiko Ihle. However, the expert believes that shares could hit $13.25, which implies significant upside from the current market value. With the underlying fundamentals pointing in a positive direction, it may be worth some pocket change.
Looking at data provided by Seeking Alpha, revenue for the fiscal year ending June 2024 could come in at $317.25 million. That’s up around 8.4% on a year-over-year basis. However, it’s possible that the top line could improve due to heightened demand for gold.
An image of a rising bar graph on top of gold bars, representing gold stocks
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Another royalty enterprise, Gold Royalty (NYSEAMERICAN:GROY) essentially provides financing solutions to the metals and mining industry. In addition, it also acquires streams and similar interest at varying stages of the mine life cycle. Fundamentally, Gold Royalty’s business model offers pricing predictability, as stated earlier. However, GROY enjoys another element desirable for speculators.
Currently, Gold Royalty carries a market capitalization of only $290.32 million. That means unlike larger-cap royalty and streaming enterprises, GROY offers significant mobility. Indeed, since the start of the year, GROY gained almost 38% of equity value. Better yet, it could be due for even more gains.
For the current fiscal year, experts believe the company will post a loss per share of 2 cents. That’s a big improvement over last year’s loss of 4 cents. However, the real star of the show is the sales forecast. At $9.97 million, a successful meeting of the target would mean 227.1% upside against last year’s print of $3.05 million.
Analysts also peg shares as a consensus moderate buy with a $4.63 average price target. That implies nearly 133% upside potential, making it one of the gold stocks for gamblers.
U.S. Gold (USAU)
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If you want to dial up the risk-reward profile for your gold stocks to buy, U.S. Gold (NASDAQ:USAU) presents an enticing argument. According to its corporate profile, the company engages in the exploration and development of gold and precious metals in the U.S., just like its name suggests. It also explores copper and silver deposits.
As an upstream enterprise, U.S. Gold is highly risky. Basically, you just don’t know whether you’ll strike it rich or end up with fool’s gold. That said, USAU stock carries a lowly market cap of $44.16 million. That’s below the top threshold of nano-cap status. In other words, USAU is a penny stock and it should be treated with extreme caution.
Here’s something intriguing about the company, however. If you look at the company’s “earnings” history, it has consistently beat its bottom-line targets. Granted, we’re talking about losses per share coming in less bad than anticipated. Still, the average surprise is 25.18%.
Again, this is an upstream enterprise: the company will win or lose with probably no in between. Still, analyst rate shares a moderate buy with a $13.13 price target, projecting 218% upside potential.
On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare. Tweet him at @EnomotoMedia.
