As the U.S. Dollar strengthens, now may not seem like the right time to buy gold stocks. Especially as the Federal Reserve appears likely to continue raising interest rates to combat inflation. Further rate hikes could send the U.S. Dollar Index, already at multi-year highs, even higher.
The Fed’s interest rate hike has already put pressure on gold prices, as it has on other hedges to the dollar. Since beginning to raise rates in March, spot gold prices have sunk from over $2,000 an ounce to just under $1,800 per ounce.
Still, that doesn’t mean you should avoid having any exposure to gold in your portfolio. In fact, it’s wise to have some exposure, as a hedge. Why? It’s possible that the current combination of monetary tightening and a slowdown in the economy could lead to stagflation. Stagflation is bad news for stocks, but good news for gold prices.
As they can produce outsized returns relative to increases in the price of gold (due to operating leverage), adding some gold stocks (like these) to your portfolio can be a great stagflation hedge.
| CTGO | Contango ORE | $22.13 |
| GFI | Gold Fields | $9.22 |
| GORO | Gold Resource Corporation | $1.82 |
| HYMC | Hycroft Mining | $0.99 |
| IDR | Idaho Strategic Resources | $6.28 |
| TRX | TRX Gold | $0.49 |
Contango ORE (CTGO)
Contango ORE (NYSEAMERICAN:CTGO) is focused on gold exploration projects in Alaska. One of its newest projects is its Peak Gold partnership with Kinross Gold (NYSE:KGC). It holds a 30% interest in the project.
Per the company, this project could ultimately produce 1 million ounces of gold, starting in 2024. If this works out, the resultant windfall from its share would be significant. It would undoubtedly be a needle-mover for micro-cap CTGO stock, which has a market cap of only $150 million.
Even before this project begins to take shape, Contango ORE stock could keep rising, if gold prices climb back up. Higher gold prices will further increase the potential value of its share in the Peak Gold partnership. In turn, raising the present value of the stock. While risky, it’s still one of the gold stocks worth keeping in mind.
This stock earns a “B” rating in my Portfolio Grader.
Gold Fields (GFI)
Gold Fields (NYSE:GFI) is a global gold mining giant. Outside of its gold-rich home country of South Africa, it also mines gold in Australia, Chile, Ghana, Peru, and West Africa.
Like other major gold mining stocks, GFI stock has been hit hard in recent months by the slump in spot gold prices. Trading for as much as $17.10 per share back in March (on the heels of Russia’s invasion of Ukraine, and the resultant jump in the price of gold), gold’s dip on a stronger dollar has pushed it back to high single-digit prices.
However, if you’re looking for a gold stock that could make a big jump if gold returns to prices above $2,000 per ounce, Gold Fields is just the ticket. It’s cheap valuation-wise, trading for only 9.5x earnings. The company is also anticipating a jump in profitability, thanks to increased production.
This stock earns a “B” rating in my Portfolio Grader.
Gold Resource Corporation (GORO)
Like Contango ORE, Gold Resource Corporation (NYSEAMERICAN:GORO) is another of the promising micro-cap gold stocks out there. However, unlike the above-mentioned micro-cap miner, Gold Resource is well beyond the exploration stage.
It’s already generating consistent revenue/earnings, from the mines located at its Don David Gold site in Oaxaca, Mexico. Even so, don’t assume Gold Resource is sitting on its laurels. Management is at work to produce further upside for its investors. From both its existing Don David operations, as well as through its Back Forty Project, located in the U.S. state of Michigan.
Success with its current exploration efforts could result in another jump in profitability for the company. This gives it a second catalyst, besides the upside potential from higher gold prices. In the meantime, GORO stock trades at a reasonable earnings multiple (15.75x), and pays out a solid 2.12% annual dividend.
This stock earns a “B” rating in my Portfolio Grader.
Hycroft Mining (HYMC)
Following an investment in the company by AMC Entertainment (NYSE:AMC), once under-the-radar Hycroft Mining (NASDAQ:HYMC) briefly became a meme stock earlier this year. This “meme wave” has long since passed.
Hitting prices above $3 per share, HYMC stock now changes hands for around $1 per share. Yet while the meme crowd has moved on, that doesn’t mean you should take a hard pass on it as a potential gold price hedge for your portfolio.
As I argued back in May, there’s high potential with Hycroft. At least, based on the size of the precious metal deposits located at its mining site from which it gets its corporate name, located in Northern Nevada.
At this site, there are measured and indicated resources of 9.5 million gold ounces and 456 million silver ounces. Not too shabby, given its current market cap of just $201.7 million.
This stock earns a “B” rating in my Portfolio Grader.
Idaho Strategic Resources (IDR)
As you may quickly infer from its name, Idaho Strategic Resources (NYSEAMERICAN:IDR) mines for base metals in and near “the Gem state.” Its main asset is the Golden Chest mine, located in Murray, Idaho.
At present, the Golden Chest mine is active, producing gold and generating revenue. However, along with its exposure to gold, IDR stock offers something else. That would be possible exposure to rare earth metals. The company is currently in the exploration stage when it comes to rare earth element (or REE) properties.
Even so, given the push by the U.S. Federal Government to reduce America’s dependence on rare earth metals from China, Idaho Strategic Resources may be able to attract the investment and support needed to realize the potential from these assets.
This stock earns a “B” rating in my Portfolio Grader.
TRX Gold (TRX)
TRX Gold (NYSEAMERICAN:TRX), formerly known as Tanzanian Gold, focuses on gold projects located in the African nation of Tanzania. In contrast to other gold stocks, it has zoomed in price recently.
News of production growth and lower operating costs has outweighed the negative that is a slump in gold prices. Yet even as TRX stock is trading near its 52-week high, there’s no need to pass up on it, on the belief that it’s topped out in price. The big increase in production is set to result in a big jump in profitability this fiscal year (ending August 2023).
According to analysts, earnings could rise 3x compared to the current fiscal year. If gold prices bounce back in the months ahead, it could see an even greater jump in profitability.
Don’t let its penny stock price fool you, there’s more than speculative hype behind its recent price jump.
This stock earns a “B” rating in my Portfolio Grader.
On the date of publication, neither Louis Navellier nor the InvestorPlace Research Staff member primarily responsible for this article held (either directly or indirectly) any positions in the securities mentioned in this article.