Gold Rush: Tips for Investing in Mining Stocks
Gold prices have been on a tear, rising by 16% year-to-date, significantly outpacing the 7% return generated by the S&P 500 index thus far.
In fact, gold prices have reached historical highs, peaking at $2,431. Typically, a strengthening USD negatively impacts gold prices, as fewer dollars are needed to purchase the same amount of gold. However, the market is forward-looking and may have already priced in the anticipation of rate cuts and a weakening USD in the future. Additionally, increasing geopolitical risks and unrest in the Middle East may have further boosted this doomsday asset class.
Whatever the reason, gold has certainly regained its luster, and investors are taking notice. A Wall Street Journal article mentioned that gold bars have become popular at Costco, where stock frequently sells out. According to a Wells Fargo report, Costco has been making $100-200 million per month from selling these gold bars. Besides purchasing physical gold, an accessible option for investors is to invest in gold ETFs, such as the SPDR Gold Trust (GLD) or iShares Gold Trust (IAU).
The next alternative to consider is investing in gold miners. There are several indicators to examine when assessing these companies.
One key metric is the All-In Sustaining Cost (AISC), which measures the total costs related to current mining operations necessary to maintain the mine and its production levels. More importantly, it allows us to compare the 'cost prices' among different miners.
S&P Global Intelligence has compiled these figures in the image below:
