Canada’s main index TSX rose on Friday, supported by higher oil and gold prices. Spot gold was up 0.2% at $1,786.87 per ounce by 0332 GMT, positioning gold for a 3rd weekly gain, up 0.6% so far this week.
The yellow metal’s appeal enjoyed a boost after U.S. President Joe Biden's proposal to hike capital gains tax weighed on U.S. Treasury yields. A weaker dollar also and uncertainty about how the U.S. Federal Reserve is going to play next week are further boosting gold markets.
This latest development will likely see gold stocks gain for a third consecutive week on optimism around a faster economic rebound. Many investors may be wary about going into gold miners here after a 3-week rally. However, many mining stocks are still very reasonably valued, and there are a select few that look like solid candidates you can buy during the dip.
Alamos Gold is a promising gold miner and intermediate gold producer with operations in Canada and Mexico. The company’s mineral reserve was recently updated for FY2020 and it is now one of only nine companies to report an increase in mineral reserves. Alamos’ Island Gold Mine in Ontario saw a massive boost in its inferred resource base at the mine (separate from reserves). Even with a conservative conversion rate of resources to reserves of 70%, the Island Gold Mine has a long mine life. This information is sufficient to support the company’s growth plans to ~236,000 ounces per year by FY2025 (from 140,000 ounces currently). According to analysts, Alamos is likely to see significant margin expansion starting in 2024, looking out until the late 2030s.
The current volatility of the market is directing some investors to alternatives to gold bullion and gold stocks. If you are interested in gaining exposure to gold at this time, a gold miners ETF is a viable option. One strong choice is the VanEck Vectors Gold Miners ETF. This ETF provides exposure to mining stocks from large and medium-tier gold miners including Barrick Gold and Newmont Corporation. Along with these aforementioned companies, it features the gold stocks of some mid-tier and junior gold mining companies. Gold ETFs are a good alternative if you want to minimize your company-specific risk while gaining diversified exposure to a basket of gold stocks in the sector.