Everyone knows the myth about Midas, whose greed for gold became his downfall. Perhaps if he had found a way to make money from gold without owning it, his story would have had a happy ending.

If Midas were a modern-day investor, he would be wise to put his money in

Royal Gold

(RGLD) - Get Report

, which profits from royalties on precious metals.

Royal Gold leaves metal exploration and management to mining companies. The company pays mine operators upfront and collects a percentage of the metal produced. It's shielded from the operational costs, making it a lower-risk investment than mining stocks.

During recessions,

investors consider gold

and silver safe havens and a way to hedge against inflation. As governments around the globe inject capital into their economies, inflationary concerns will likely mount and the prices of precious metals will climb.

Gold prices have risen 73% in the past two years, and we expect that

trend to continue

in 2009. Economists and commodity analysts predict gold will top $1,500 an ounce this year. Silver will likely follow the same trajectory.

Royal Gold is benefiting from that optimism, which has lifted its shares 51% during the past year and 31% in the past six months. The stock is trading at an industry-relative premium based on price to earnings, price to sales, and price to cash flow.

While the Denver-based company's revenue declined slightly to $14.6 million in the most recent quarter, its net income quadrupled. Its gross margin widened to 95.81% from 93.91%.

The company has minimal debt, reflected by a debt-to-equity ratio of 0.04. Its cash position is strong as demonstrated by its 3.57 quick ratio, a measure of its cash reserves.

While Royal Gold is a small-cap stock with a limited portfolio of investments, its success in selecting properties is clear. Revenue, free cash flow and earnings have grown at an average annual compounded rate of 34%, 38% and 31%, respectively, over a five-year period.

Royal Gold is positioned to buy more royalties in the coming quarters, which could boost its earnings. Last year, the company bought three royalties from

AngloGold Ashante

(AU) - Get Report


Barrick Gold's


77-royalty investment portfolio. The company purchased royalty investor

Battle Mountain Gold Exploration

in 2007.

Still, it isn't all positive news at Royal Gold. The company has sizable exposure to copper, which is an industrial metal that could depreciate this year if the housing and manufacturing industries continue to sputter. Demand for copper in China, which consumes 80% of the world's supply, is declining.

Institutional investors own 62% of Royal Gold's shares. The company has a beta of 0.54 and daily trading volume of 800,000 shares. While it's not a value stock, it's a sound company that offers the opportunity to gain from the rise in the prices of precious metals.

In my

last article

, I pitched four recession-resistant stocks that are likely to beat the market in 2009. They were

Green Mountain Coffee Roasters


, generic foodmaker



, denim retailer

The Buckle

(BKE) - Get Report




, the film studio. I'm adding Royal Gold to the list.