Gold prices may be far from the record highs of $1,900 an ounce they touched in 2011 in the aftermath of the Great Recession, but they likely are headed that way again.
Crashing global prices of crude oil, anemic growth in China, loose central bank policies in developed economies like Japan and Europe, and uncertainty on interest rate action by the Federal Reserve is causing investors to rush for cover to perceived safe haven investments such as gold. It's almost like déjà vu.
While the rest of the equity markets have witnessed a bloodbath since the start of the year, stocks of gold-mining companies are benefiting from the renewed interest in gold. These gold stocks are among the most promising investments available in this crazy market.
One factor supporting gold is a lesser supply of the yellow metal in the market. As gold prices have slid over the past three years, production was not exactly viable for miners, with many producers holding production steady or scaling it back. As a result, after seven years of higher production, global output for gold is expected to decline by 3% this year, according to Thomson Reuters' metal research unit, GFMS.
All of these trends suggest you should include gold stocks in your portfolio to insulate it against other volatile industries. The following six companies are our top picks.
Barrick Gold (ABX)
Things have improved for Toronto-based gold producer Barrick Gold on two fronts since last year.
First, the company made some serious efforts to cut down its gargantuan debt, which stood at $13 billion at the start of 2015. With a mix of asset sales, joint ventures and cost cuts, the company achieved its target of lowering debt by $3 billion.
Miners such as Barrick are also benefitting from increasing gold prices. Gold futures for April delivery have risen by 6.43% so far this year.
Both factors combined have helped Barrick advance 44% on a year-to-date basis. The stock still has a long way to go to come close to its 2011 levels of $50 when gold prices were at record highs. But it's among a class of fast-growth investments you should consider in this extremely volatile market.
According to Barrick's president Kelvin Dushnisky, 2016 will be about continuing to lower operating costs and improve productivity to further cut down debt. In the long run, the company is expected to cut back on operations to cap them at about six core mines in the Americas.
High debt makes Barrack's balance sheet more levered and thereby more sensitive to the price of gold. But the way the company is moving toward managing its debt, the stock is one of the smarter growth picks available today.