Going for Gold: The Best Gold Stocks to Invest in

Going for Gold: The Best Gold Stocks to Invest in

Gold isn't a one-size-fits-all investment, so finding the right gold stock to invest in will take some panning.

Going for Gold: The Best Gold Stocks to Invest in
Guy Ovadia

Published Mar 15, 2022Updated Sep 15, 2022

Commodities & Gold

Commodities & Gold

Stock Trading

Stock Trading

Balanced Investing

Balanced Investing

Investors tend to keep their eyes on gold during times of economic uncertainty, so there's no question as to why gold prices are on the up. Gold stocks can be an easy way to add exposure to gold into your portfolio while maintaining relative liquidity. However, not all gold stocks are the same—the price of some gold stocks can deviate from actual gold prices. If you're looking for the best ways to invest in gold in the stock market, here's everything you need to know.

What are gold stocks?

Gold ETFs are a convenient way for investors to make smaller investments into gold since they're structured to already include associated costs like storage and maintenance.

Gold stocks are any publicly traded security backed by physical gold or by gold-related assets like gold mines. The most straightforward type of gold stock is a gold exchange-traded fund (ETF), which gives investors exposure to gold as an underlying asset. ETFs don't translate into ownership of the underlying asset, but rather serve as an instrument for investors to buy and sell gold without dealing with it physically.

While most gold ETF shares represent a portfolio of physically secured gold, ETFs can also trade other gold-related assets like futures contracts and gold mining stocks. Gold derivative ETFs that deal with gold futures are riskier because they're more impacted by volatility and price speculation. Conversely, investors who believe that gold is a good investment can add it to their portfolio as a commodity by buying shares in either gold mining companies or a diversified precious metal ETF.

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Top 7 gold stocks

Investors should carefully consider the different ways to invest in gold because no two gold stocks are exactly alike. For example, gold ETFs can be backed by physical gold or derived from a diversified portfolio of assets like stocks in gold mining companies and gold futures. Before investing in gold stocks, it's important to measure risk by identifying whether a share represents gold as an underlying asset or if it's a derivative that could diverge from gold prices.

Types of Gold Stocks

  • Gold ETF: investing in a fund that deals with gold as an underlying asset
  • Gold mining stock: investing in companies that extract gold
  • Gold derivative ETF: investing in gold futures or several gold-related assets
  • Alternative investment platforms: investing directly in non-publicly traded gold

Barrick Gold (GOLD)

One of the best ways to invest in gold is by buying stock in a mining company and Barrick Gold (GOLD) is one of the best there is. The Barrick Gold Corporation focuses on the extraction of gold and copper from large-scale mines across North and South America as well as Africa. Barrick is one of the most consistently profitable mining stocks focused on predominantly gold-related activities like exploration, mine development, and extraction. 

Barrick aims to make the extraction process more cost-efficient to keep their mines profitable even if the price of gold rises. Considering its extensive mining portfolio and strong balance sheet, it's feasible for Barrick to achieve its goal of $800 per ounce by 2025. Barrick aims to sustain their profits regardless of the price of gold, thus making it one of the best stocks for investors looking for exposure to gold as a commodity. Few gold stocks pay dividends—a bonus that sets GOLD apart from the rest of this list.

Vale SA (VALE)

Investors who want exposure to gold as a commodity but desire stock in diversified mining companies should have a look at Vale. Vale is one of the most traded gold mining companies in the world and its business focuses on three subsectors: ferrous metals, base metals, and coal. While only a small portion of Vale is focused on the extraction of precious metals, its logistics network makes it one of the world's most influential mining firms.

Vale's logistics arm controls an extensive transportation infrastructure spanning South America, East Africa, the Middle East, Oceania, and Asia that connects mines to a global network of ships, ports, and railroads. As one of the top third-party carriers of cargo like unrefined ore and precious metals, Vale is positioned as a key actor in the gold supply chain. An investment in Vale could be a great part of a comprehensive portfolio since it's one of the top gold mining stocks.

VanEck Vectors Gold Miners ETF (GDX)

Gold ETFs are a convenient way for investors to gain exposure to a diversified portfolio of precious metal and gold mining stocks. VanEck Vectors Gold Miners (GDX) is a gold mining ETF derived from stocks in the top companies engaged in mining and other gold-related activities. GDX aims to replicate the price performance of the AMEX Gold Miners Index (GDM), minus fees and expenses while providing more liquidity than other gold mining ETFs.

GDX is the easiest way to add gold mining to your portfolio without having to buy stock in individual mining companies. While GDX is great for spreading risk across multiple mining ventures, gold mining ETFs like GDX are less correlated with the price of gold because they don't deal with physical gold directly. Although GDX is great for investors who are bullish on gold as a commodity, investors looking for a store of value investment will prefer ETFs where gold is the underlying asset.

SPDR Gold MiniShares Trust (GLDM)

ETFs are the best option for investors looking for direct exposure to gold as an asset, and State Street Global Advisors offers some of the top gold funds. First up is their SPDR Gold Shares ETF (GLD) which was designed to give retail investors cost-effective access to the gold bullion market. GLD is the largest physically-backed gold ETF in the U.S., but competition from lower-cost alternatives has led State Street to create a cheaper low-fee version of GLD called SPDR Gold MiniShares Trust (GLDM).

GLDM has one of the lowest expense ratios of any physically gold-backed ETF, making it a more convenient and effective way to invest in gold than any of its predecessors or competitors. GLDM is cheap and cost-efficient because each share of GLDM represents only one-hundredth of an ounce of gold and the annual fee is less than half that of GLD. GLDM is the best ETF for frugal investors looking to gain direct exposure to gold while minimizing associated costs.

iShares Gold Trust (IAU)

iShares Gold Trust (IAU) is one of the longest-running reliable gold trusts. IAU is popular among retail investors because its relatively low expense ratio has historically kept its price closer to that of gold compared to competing ETFs. IAU is not an actively managed fund, which means administrative costs associated with pursuing arbitrage opportunities are eliminated. 

IAU's simple structure allows it to adhere more closely to the spot price of gold than most other ETFs. One caveat to this is that the price of IAU shares is determined using the LBMA gold price of the day or most recent trading day, which could lead to discrepancies since the underlying assets are held in London. While timezone differences could pose short-term issues, investors looking for a convenient way to gain exposure to physical gold may be satisfied with iShares Gold Trust in their portfolio.

ProShares Ultra Gold (UGL)

Investors looking for a bullish investment in gold may want to consider leveraged exposure ETFs like ProShares Ultra Gold (UGL). UGL deals in gold futures as a way to provide investors double the daily performance of gold according to Bloomberg's Gold Subindex. In other words, investing in UGL can serve as an instrument to speculate on short-term spikes in the spot price of gold. 

Investors can add UGL to their portfolio to capitalize on an immediate upward movement of the price of gold, but it doesn't come without risk. UGL is derived from futures contracts, which are leveraged positions that are essentially a gamble on the price of gold going up. Because UGL is a leveraged position, its price per share will move twice as much as the normal price of gold, which means potentially higher gains or lower losses. Risks notwithstanding, investors looking to make a short-term bet on the price of gold going up should consider buying UGL.

Direxion Daily Junior Gold Miners Index Bull 2X Shares (JNUG)

If you're looking to gamble on gold as a commodity rather than as an asset, then perhaps you should consider a leveraged exposure mining ETF like Direxion Daily Junior Gold Miners Index Bull 2X Shares (JNUG). JNUG provides double exposure to the MVIS Global Junior Gold Miners Index, updated daily, which is an index comprising of small-cap global mining companies that derive at least 50% of their revenue from gold or silver-related activities. 

Like other leveraged positions, it's not recommended to hold JNUG over the long term because it better serves as an instrument for short-term speculation on the precious metals mining market. JNUG is a great way for investors to bet on the growth of small gold mining companies, but those looking to bet against them could consider its sister fund JDST. JDST provides negative exposure to the same index, which means JDST and JNUG will always move opposite each other. Investors looking to make near-term calls on gold as a commodity should explore these opportunities.

Investing directly in gold

Investing in gold is a great way to hedge against stocks and fight inflation, but what if investing in the best gold stocks or derivatives isn't good enough? Well, you can have your cake secured in a vault in a different country and eat it too with alternative platforms that let you invest directly in physical gold. Precious metal investing platforms like OneGold, Vaulted, and Glint have made investing directly in gold as easy as investing in gold stocks.

Vaulted

If you're looking for the real McCoy, then say hello to Vaulted, an alternative investment platform that will "democratize access [to] gold for the little guy" according to CEO David McAlvany. That's right, Vaulted lets investors add precious metals like gold, silver, and platinum to their portfolios. Investors can use Vaulted to buy and sell fine gold bullions backed by the Royal Canadian Mint and Vaulted assigns them a serial number with the corresponding bullion which never leaves the vault unless they request to have it delivered. There is no more convenient way to invest directly in gold than with Vaulted.

vaulted
Vaulted

Gold

One Gold

With OneGold, you invest in digital assets that are fully backed 1:1 by physical gold, silver, and platinum. The value of your investment appreciates if the price of precious metals goes up, and you can sell at any time.

onegold
OneGold

Gold

Hard Assets Alliance

Hard Assets Alliance makes investing in gold and silver easier than buying stocks. Set up and fund an account in minutes to start investing directly in physical gold coins and bars, which you own and can either have shipped to you or stored in their vaults. They also offer an automatic investment program, and you can get started with as little as $25.

hard-assets-alliance
Hard Assets Alliance

Gold