Gold has always formed an important part in our monetary system. Starting out as a currency, it became a store of wealth that central banks used to back their currency and eventually an asset that traders used to protect their wealth. These days, it might not play a role with central banks, but it is still used as a hedge against inflation by professional and retail traders alike.
An alternative to buying physical gold is to invest in gold stocks. But there are unique risks (and rewards) that come with buying gold stocks that you should be aware of.
Here's what you need to know before investing in gold stocks.
What are gold stocks?
Gold stocks are stocks from companies involved in the mining and production of gold. The category is heavily dominated by mining companies, but investors in Australia can also back gold streaming and royalty companies – companies that fund mining efforts in exchange for the opportunity to buy gold at a set price in the future.
In some instances, these mining companies will be exclusively mining gold; in others, they will mine other minerals.
Gold stocks are one way for investors in Australia to gain access to this historically significant commodity. There are also other ways to invest, including gold exchange traded funds (ETFs) and purchasing physical bullion and coins.
Top ASX gold stocks
Company summary
Newcrest Mining Limited, together with its subsidiaries, engages in the exploration, mine development, mine operation, and sale of gold and gold/copper concentrates. The company is involved in the exploration and production of silver deposits. It primarily owns and operates mines and projects located in Cadia, Telfer, and Havieron, Australia; Lihir and Wafi-Golpu, Papua New Guinea; and Brucejack and Red Chris, Canada. Newcrest Mining Limited was founded in 1966 and is headquartered in Melbourne, Australia. As of October 18, 2023, Newcrest Mining Limited operates as subsidiary of Newmont Corporation.
Northern Star Resources Limited engages in the exploration, development, mining, and processing of gold deposits. It also sells refined gold. It operates in Western Australia, the Northern Territory, and Alaska. The company was incorporated in 2000 and is headquartered in Subiaco, Australia.
Evolution Mining Limited engages in the exploration, mine development and operation, and sale of gold and gold-copper concentrates in Australia and Canada. The company also explores for copper and silver deposits. It owns and operates mines, including Cowal in New South Wales; Ernest Henry and Mt Rawdon in Queensland; Mungari in Western Australia; and Red Lake in Ontario, Canada. The company was formerly known as Catalpa Resources Limited and changed its name to Evolution Mining Limited in November 2011. Evolution Mining Limited was incorporated in 1998 and is based in Sydney, Australia.
Regis Resources Limited, together with its subsidiaries, engages in the exploration, evaluation, and development of gold projects in Australia. It owns 100% interests in the Duketon gold project located in the North Eastern Goldfields of Western Australia; and the McPhillamys gold project situated in the Central Western region of New South Wales, as well as holds 30% interest in Tropicana Gold Project. Regis Resources Limited was incorporated in 1986 and is based in Subiaco, Australia.
St Barbara Limited, together with its subsidiaries, engages in the exploration, development, mining, and sale of gold. It operates three operational business units, including Leonora Operations, Simberi Operations, and Atlantic Operations. The company also explores for silver deposits. Its properties include the Gwalia underground mine located in Leonora, Western Australia; the Simberi gold mine located in New Ireland province, Papua New Guinea; and Atlantic Gold operations in Nova Scotia, Canada. The company was incorporated in 1986 and is based in Perth, Australia.
Chalice Mining Limited operates as a mineral exploration and evaluation company. It explores for gold, copper, cobalt, palladium, platinum, and nickel deposits. The company has interest in the Gonneville Nickel-Copper-PGE Project and the exploration of projects located in the West Yilgarn region of Western Australia. Chalice Mining Limited was incorporated in 2005 and is based in West Perth, Australia.
Silver Lake Resources Limited, together with its subsidiaries, engages in the exploration, mine development, mine operation, and sale of gold and copper concentrates in Australia and Canada. The company holds interest in the Deflector operations that produce gold bullion and gold-copper concentrates located in the Southern Murchison region of Western Australia; and Mount Monger operations, which produce gold bullion located within the Kalgoorlie terrane subdivision of the Eastern Goldfields Province. It also holds interest in the Sugar Zone operations that produce gold bullion and gold concentrates located in Northern Ontario, Canada. The company was incorporated in 2004 and is headquartered in South Perth, Australia.
Ramelius Resources Limited, together with its subsidiaries, engages in the exploration, mine development and operation, production, and sale of gold in Australia. It operates through three segments: Mt Magnet, Edna May, and Exploration. The company owns and operates the Mt Magnet, the Edna May, the Vivien, the Marda, the Tampia, the Rebecca, and the Penny gold mines located in Western Australia. It also develops Symes' Find prospect located in the Southern Cross Province of the Eastern Goldfields. The company was incorporated in 1979 and is headquartered in East Perth, Australia.
Gold Road Resources Limited, together with its subsidiaries, engages in the exploration of gold properties in Western Australia. It owns 50% interest in the Gruyere gold mine located in north-east of Perth. The company was formerly known as Eleckra Mines Limited and changed its name to Gold Road Resources Limited in November 2010. Gold Road Resources Limited was incorporated in 2004 and is based in West Perth, Australia.
De Grey Mining Limited engages in the exploration of mineral properties in Australia. It primarily holds a 100% interest in the Mallina Gold project covering an area of approximately 1,500 square kilometers located in the Pilbara region of Western Australia. De Grey Mining Limited was incorporated in 2000 and is based in West Perth, Australia.
Westgold Resources Limited engages in the exploration, operation, development, mining, and treatment of gold assets primarily in Western Australia. The company's assets include Bryah Operations, Murchison Operations, Meekatharra Gold Operations, and Cue Gold Operations that comprise various mining titles covering 1,300 square kilometers in the Murchison region. Westgold Resources Limited is based in Perth, Australia.
Historical performance
Company summary
Bellevue Gold Limited, together with its subsidiaries, engages in the exploration and evaluation of gold properties in Australia. It holds a 100% interest in the Bellevue gold project covering an area of approximately 2,700 km2 located to north-west of Kalgoorlie, Western Australia. The company was formerly known as Draig Resources Limited and changed its name to Bellevue Gold Limited in July 2018. Bellevue Gold Limited was incorporated in 2004 and is based in West Perth, Australia.
Resolute Mining Limited engages in mining, prospecting, and exploration for minerals in Africa, the United Kingdom, and Australia. It is involved in mining gold and silver. The company's flagship project is the Syama Gold Mine located in Mali, West Africa. It also owns Mako Gold Mine in Senegal, West Africa. The company was incorporated in 2001 and is based in Perth, Australia.
Historical performance
Stock information
Market capitalization: $862265216
P/E ratio: 8.1
PEG ratio: 0
Company summary
West African Resources Limited engages in the mining, mineral processing, acquisition, exploration, and project development of gold projects in West Africa. The company has 90% interests in the Sanbrado Gold Project located in Burkina Faso; and Kiaka gold project located in Burkina Faso. It also holds 100% owned exploration license in the Toega Gold Project located in Burkina Faso. West African Resources Limited was incorporated in 2006 and is based in Subiaco, Australia.
Historical performance
Stock information
Market capitalization: $1330107392
P/E ratio: 9.25
PEG ratio: 0
Company summary
Andromeda Metals Limited, together with its subsidiaries, operates as a mineral exploration company in Australia. It explores for halloysite, kaolin, gold, and copper deposits. The company's primary project is the Great White and Mount Hope Kaolin project located in the Eyre Peninsula in South Australia. It also holds interests in the Drummond Epithermal Gold Project located in Drummond Basin, North Queensland; and the Eyre Peninsula Gold, Eyre Kaolin Project, Camel Lake Halloysite Project, and Moonta Copper Gold Project located in South Australia. The company was formerly known as Adelaide Resources Limited and changed its name to Andromeda Metals Limited in December 2016. Andromeda Metals Limited was incorporated in 1993 and is headquartered in Adelaide, Australia.
Historical performance
Stock information
Market capitalization: $59095128
PEG ratio: 0
Company summary
AngloGold Ashanti Limited operates as a gold mining company in Africa, the Americas, and Australia. The company explores for gold. Its flagship property is a 100% owned Geita project located in the Lake Victoria goldfields of the Mwanza region in north-western Tanzania. The company also owns 100% interest in the Iduapriem mine which covers 137 square kilometers located in the western region of Ghana; Obuasi project located in Ghana; AGA Mineração in Brazil; Serra Grande located in central Brazil in the state of Goiás; Greenfield Projects in the Beatty district in Nevada; and Sunrise Dam in Australia. It also holds 92.5% interest in the Cerro Vanguardia project situated in Argentina; 70% interest in the Tropicana property in Australia; and 85% interest in the Siguiri project in Guinea. The company also explores for silver and sulphuric acid. AngloGold Ashanti Limited was incorporated in 1944 and is headquartered in Johannesburg, South Africa.
Alkane Resources Limited operates as a gold exploration and production company in Australia. It explores for gold, copper, nickel, zinc, and silver deposits. The company also invests in junior gold mining companies and projects. Alkane Resources Limited was incorporated in 1969 and is headquartered in West Perth, Australia.
Historical performance
Stock information
Market capitalization: $395251200
P/E ratio: 13.1
PEG ratio: 0
Company summary
Red 5 Limited engages in the exploration, production, and mining of gold deposits and mineral properties in the Philippines and Australia. The company holds interests in the Siana Gold project located in the Island of Mindanao, the Philippines; the King of the Hills Gold project located in the Eastern Goldfields of Western Australia; and the Darlot Gold mine situated in the north-east of Perth in Western Australia. Red 5 Limited was incorporated in 1995 and is based in West Perth, Australia.
Historical performance
Stock information
Market capitalization: $1489434112
P/E ratio: 21.5
PEG ratio: 0
Company summary
Emerald Resources NL engages in the exploration and development of mineral reserves in Cambodia and Australia. The company's exploration tenements include a combination of 100% owned granted licenses, applications, and earn-in and joint venture agreements covering a combined area of 1,239 square kilometers. Its principal property is the Okvau Gold project located in the city of Phnom Penh, province of Mondulkiri. The company was formerly known as Emerald Oil & Gas NL and changed its name to Emerald Resources NL in December 2014. The company was incorporated in 1969 and is headquartered in West Perth, Australia.
And while there are other ways of investing in the commodity, gold stocks have a distinct advantage. They are a listed business.
While you could buy gold as bullion, you need to find a place to store and secure the gold. Should something happen to it, that becomes your issue. Gold stocks have fewer of these security risks.
Another reason to buy gold stocks is simply because of the underlying asset they mine.
Gold was valuable thousands of years ago, and it’s valuable now. It predates modern currency and its price tends to move independently of the stock market, strengthening its diversifying properties.
Historically, the price of gold has risen in tandem with the cost of living. This makes it a powerful hedge against inflation. It also tends to perform well in a down market as people fall back on the security of gold and cash in times of economic uncertainty. For an example of this phenomenon in action, look no further than the 1930s — when the market crashed, the purchasing power of gold skyrocketed.
With its ability to weather highs and lows and its inverse relationship to stocks, gold makes for a solid portfolio stabiliser.
How is it a hedge against inflation?
Inflation hedging can help protect the value of your share portfolio and other investments by working as insurance against falling prices. For example, take a share that rises by 2%, while inflation is at 3%. In this situation, you are actually losing 1% after inflation.
However, gold might not be a hedge year-to-year. The performance of gold doesn't always outperform inflation, although, over a number of years, it has traditionally been a hedge against inflation.
During periods of inflation, the costs of consumer goods increase and become more expensive, meaning the dollar value per item decreases. Since gold is dollar-denominated, its price also increases in line with the rising inflation.
The higher the price of gold, the more money miners of the commodity can get per unit. As such, it should help grow the underlying stock.
What ETFs track the gold category?
Stocks aren’t the only option for investors in Australia interested in gold – there are numerous ETFs that track the gold category. These ETFs follow numerous sub-categories of the industry, including mining companies, exploration companies and the asset itself:
VanEck Vectors Gold Miners ETF (GDX)
BetaShares Global Gold Miners ETF (MNRS)
BetaShares Gold Bullion ETF (QAU)
ETFS Physical Gold (GOLD)
Perth Mint Gold (PMGOLD)
Outside of stocks and ETFs, there’s also the option of purchasing physical gold, including coins, ingots and bars. If you plan to buy physical gold, make sure you have a secure place to store it before you invest.
Risks of investing in gold
Remember, an investment in gold stock is not the same thing as an investment in gold bullion.
Instead, you own part of a company that mines gold. That means you need to be wary of both how the company is performing and the price of the asset. This is because, at a certain price, gold is profitable for miners after the cost of production. Fall below that price and the businesses you've invested in are losing money.
Most gold stocks are vulnerable to the same risks as other mining stocks, namely economic shifts, geopolitical changes and natural disasters.
Where a mine is located factors heavily into its potential profitability, with many mining companies managing international operations. The political climate of the country in which a gold mine is located can affect material prices and a business's processes.
Gold mining companies also need to contend with Mother Nature. Natural disasters, while uncommon, may sideline mine operations for months, depending on the extent of the damage.
Share market fluctuations add to the potential risks. While the price of gold will have a major impact on the value of gold shares, it is not the only impact. Natural causes, geopolitical threats and general business impacts can all affect sentiment around a company and its share price.
Compare trading platforms to buy gold stocks
To buy gold stocks, you’ll need a brokerage account in Australia. Narrow down your options by comparing features and fees.
Important: The standard brokerage fee displayed is the trade cost for new customers to purchase $1,000 of either Australian or US shares. Where a platform charges different fees for both US and Australian shares we show the lower of the two. Where both CHESS sponsored and custodian shares are offered, we display the cheapest option.
Bottom line
No investment is free from risk and gold stocks are no exception. Before you buy in, weigh the potential benefits against the risks to determine whether gold stocks are a practical addition to your portfolio.
Compare brokerage account features and fees to find the trading platform best suited to your investment goals and budget.
Frequently asked questions
No. Physical gold is sold by precious metals dealers and banks.
XAU.
Yes. Some that do include Agnico Eagle Mines, Barrick Gold and Franco-Nevada.
Disclaimer: This information should not be interpreted as an endorsement of futures, stocks, ETFs, CFDs, options or any specific provider, service or offering. It should not be relied upon as investment advice or construed as providing recommendations of any kind. Futures, stocks, ETFs and options trading involves substantial risk of loss and therefore are not appropriate for all investors. Trading CFDs and forex on leverage comes with a higher risk of losing money rapidly. Past performance is not an indication of future results. Consider your own circumstances, and obtain your own advice, before making any trades. Read the Product Disclosure Statement (PDS) and Target Market Determination (TMD) for the product on the provider's website.
Shannon Terrell is a writer for Finder who studied communications and English literature at the University of Toronto. On any given day, you can find her researching everything from equine financing and business loans to student debt refinancing and how to start a trust. She loves hot coffee, the smell of fresh books and discovering new ways to save her pennies.
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