Gold stocks are the ultimate hedge against inflation. While the recent rally has put the top names in the spotlight, plenty of stocks flying under the radar show massive potential.
Before diving into the gold stocks to invest in, let’s understand why gold serves as a good hedge against inflation. As one of the oldest investment classes in history, gold offers a store of value that remains unmatched. It has tangible, real-world use cases and unlike fiat currencies, it is limited in supply and retains its value. Moreover, gold prices do not correlate with the market, making it a great diversification tool.
While gold has always remained a solid investment choice, 2024 is shaping up to be a solid year for the yellow metal. Gold prices hit a record high on July 17th as news of an anticipated interest cut and a weak dollar boosted demand. The momentum is set to continue, with Bank of America (NYSE:BAC) predicting gold prices could reach $3,000 in the next year. The current spot price for gold is over $2,400.
Investing in physical gold can be expensive and cumbersome, making gold stocks an attractive alternative for exposure to the asset. Amid the recent price rally, several top gold stocks have experienced significant gains this year. However, several lesser-known names show promise of substantial returns.
Kinross Gold Corp (KGC)
First up on the list is Kinross Gold Corp (NYSE:KGC). The company is involved in the exploration and extraction of gold and silver ore. It maintains a wide portfolio of operations with mines across the U.S., Canada, Chile, Brazil and Mauritania.
Kinross boasts impressive mining numbers. In 2023, the company produced 2.1 million ounces of gold, with its mines in the Americas accounting for 71% of total production. Coming into 2024, Kinross produced 527,000 tonnes in the first quarter and is on track to meet its 2.1 million target this year.
In addition to strong production numbers, Kinross gives investors plenty of reasons to remain optimistic about its growth. In the last earnings report, the company reported profit margins at $1,088 per ounce with $2 billion in liquidity. KGC is also a dividend-paying stock with an annual yield of 1.33%. Its healthy cash position hints at robust dividend growth.
Despite a 79% price gain in the last 12 months, KGC stock appears to be attractively valued at a forward P/E of 15.6. Coupled with its strong financials and massive growth potential, this is one of the top under-the-radar gold stocks to hedge inflationary risks.
Coeur Mining (CDE)
Next up is Coeur Mining (NYSE:CDE), a producer of precious metals with operations across several regions, including Mexico, Nevada, South Dakota, Alaska and an exploration site in British Columbia. It has been a strong year for CDE stock, with shares up 101% this year. Much of this growth was driven by China.
Coeur Mining’s production numbers are just as impressive as its share price. Earlier this month, the company announced that its newly expanded mine in Rochester achieved its mid-year target run rates. At full capacity, the production levels at this mine will be 2.5 times higher than historic levels. That amounts to 32 million tons per year.
According to Coeur’s CEO, the increased production levels will increase cash injection and lower debt levels. This makes the stock an ideal hedge against inflation. Looking at the bigger picture, CDE expects total gold production rates for the year to exceed 2023 levels. The company projects production rates between 310,000 to 355,000 ounces.
With strong production rates and an expanding business, CDE is an underdog play with plenty of potential. The company also recorded a 76% increase in EBITDA from the prior year, making this one of the best gold stocks to hedge against inflation.
DRDGOLD Limited (DRD)
DRDGOLD Limited (NYSE:DRD) is an under-the-radar small-cap stock that pays a strong dividend and shows plenty of growth potential. Unlike traditional gold mining companies, South Africa-based DRDGOLD is responsible for the extracting, processing and smelting of gold. It recovers gold from the surface tailings at the Witwatersrand basin in Gauteng.
DRDGOLD’s financials are not too shabby. For the six months ended on December 31st, 2023, the company reported a revenue increase of 12% to R2 974.2 million and an operating profit rise of 15% to R909.3 million. The rally in gold prices drove these gains.
This year, DRD is in major expansion mode and has invested in Phase II of Far West Gold Recoveries, which will double plant capacity. While the capital investments will eat into costs, the company still expects to meet its production output for the year. DRDGOLD’s upcoming projects hint at massive growth in the long haul.
For income-focused investors, DRD stock has also been paying dividends for 17 consecutive years, currently at a 4.6% annual yield. The company’s strong performance and optimistic outlook make it one of the top gold stocks to hedge inflation.
On the date of publication, Divya Premkumar did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
On the date of publication, the responsible editor did not have (either directly or indirectly) any positions in the securities mentioned in this article.
