Investors in the world of gold are facing a dilemma: should they buy gold shares or invest directly in gold itself? The yellow metal has seen a significant rise in price, up over 10% since Valentine’s Day and more than 20% since last October, trading near all-time highs. However, the shares of gold mining companies have not kept pace with this increase.
According to two top-performing gold fund managers, Christopher Mancini and Caesar Bryan, the outlook is positive for gold mining stocks. They suggest that if gold prices continue to rise, gold stocks will have a good move as they are not currently pricing in the increase in the price of gold.
One reason for the lag in gold stocks is the increase in production costs, which have risen 35% since early 2020, mainly due to higher labor costs. However, if the gold price rally continues, the mining companies are expected to join in and rally as well.
Several factors are expected to support the price of gold and potentially push it higher. Central banks, particularly in China and Russia, continue to buy gold as a safe asset amidst geopolitical tensions. Chinese investors are turning to gold as a safe-haven investment due to pressures in real estate and stock markets. Additionally, changes in the U.S. economy, such as lower interest rates and a potential decline in the value of the U.S. dollar, could also favor gold.
Mancini and Bryan have identified several gold mining companies worth considering, including Newmont, Agnico Eagle Mines, Wheaton Precious Metals, Lundin Gold, and Osisko Mining. These companies have strong fundamentals and growth potential, making them attractive investments in the current gold market. With the positive outlook for gold prices and potential for gold stocks to rise, investors may find opportunity in the gold sector in the coming months.
