6 best gold stocks to watch for the rest of 2024

In 2024, a period filled with economic fluctuations and uncertainties, gold stocks captured the attention of Australian investors due to their safe-haven properties and inflation-hedging characteristics. As an investment instrument closely linked to the traditional precious metals market, gold stocks not only offer the opportunity for capital appreciation but also serve as a store of value during market turbulence.

This article will delve into the basic concepts of gold stocks, their investment advantages, and the key factors driving their price increases. It will also feature the top 6 gold stocks to watch in the fourth quarter of 2024, providing a comprehensive investment guide for Australian investors.

What are gold stocks?

Gold stocks refer to the shares issued by listed companies engaged in gold mining, processing, and sales. These enterprises focus on various aspects of the gold industry, including the excavation of gold mines, the purification of gold, and the eventual sale of gold products.

A notable characteristic of gold stocks is their price correlation with the market price of gold. As a rare and value-storing precious metal, fluctuations in the market value of gold directly affect the performance of gold stocks. Consequently, when the market price of gold rises, the value of gold stocks tends to increase as well, with the company's profit prospects improving and the stock price rising accordingly; when the market price of gold falls, gold stocks may face downward pressure.

Furthermore, gold stocks also demonstrate a certain ability to hedge against inflation. During periods of inflation, the real purchasing power of currency decreases, while gold is often seen as a means of preserving value, with its value remaining stable or even increasing. Therefore, investing in gold stocks can help investors mitigate the risks brought about by inflation to a certain extent, providing them with more stable investment returns.

Why invest in gold stocks?

In the volatile global economic environment, investment in gold stocks garners increasing attention from investors due to their unique advantages. Gold stocks are not only a traditional safe-haven asset but also possess characteristics that make them resistant to inflation, and they can benefit from changes in monetary policy. Additionally, their negative correlation with the US dollar offers investors additional hedging opportunities, while the global liquidity of gold also brings convenience to investment.

1. Safe-haven asset

Gold stocks can protect investors during times of increased economic uncertainty, financial market volatility, or heightened geopolitical risks. In these periods, gold often retains or increases in value due to its scarcity and stable purchasing power, thus providing protection and appreciation for investors' portfolios.

2. Inflation-resistant properties

Gold is typically seen as an inflation hedge. When inflationary pressures rise, investors often turn to gold to preserve value. The supply of gold is relatively stable and cannot be increased without limit; therefore, under inflationary pressures, the purchasing power of gold remains relatively stable, making gold stocks an effective tool for hedging against inflation.

3. Impact of monetary policy

Changes in monetary policy, especially accommodative policies, can increase the money supply and enhance monetary liquidity, leading to inflation and subsequently affecting gold prices. Bank of America believes that the gold bull market is driven by policy and inflation. The Federal Reserve is determined to reduce real interest rates in the coming quarters. Investors need to hedge against the threat of inflation and dollar devaluation, which could further boost gold prices.

4. Negative correlation with the US dollar

Historically, there has been a negative correlation between gold prices and the US Dollar Index. When the dollar weakens, gold prices tend to rise, providing investors with hedging opportunities in different currency environments.

5. Global liquidity

Gold is considered a highly liquid asset due to its global recognition and strong liquidity, allowing investors to trade it from anywhere in the world. Similarly, gold stocks are also easy to trade because of their good liquidity, providing investors with operational flexibility and convenience. This liquidity means that gold and its related stocks can be quickly converted into cash to meet the financial needs of investors.

What drives gold stock prices?

The fluctuation of gold-stock prices is influenced by a variety of factors, including the macroeconomic environment, geopolitical risks, monetary policy, and the actions of global central banks. These factors collectively impact the gold market, affecting investors' demand and expectations for gold stocks. The following are key factors driving the rise in gold stock prices, which not only determine the performance of gold as an asset but also reflect the deep dynamics of the global economy and financial markets.

1. Increasing US deficit enhances the appeal of gold

The sustainability of US debt, the devaluation of the dollar, and the risks of debt monetisation are key factors driving up gold prices. Historically, there has been a clear correlation between gold prices and the US fiscal deficit. According to the Congressional Budget Office, the public debt as a percentage of GDP is expected to grow from 98% in 2023 to 181% by 2053, a level unprecedented in US history. Historically, there has been a significant correlation between gold prices and US fiscal deficits. According to the Congressional Budget Office, the proportion of public debt to GDP is expected to rise from 98% in 2023 to 181% by 2053, reaching an unprecedented level in US history.

2. Gold's role as a refuge asset

The escalating geopolitical tensions in the Middle East, along with the divisions and increased uncertainty caused by the US presidential election, have led investors to increasingly prefer gold, a traditional safe-haven asset.

3. Gold prices drive gold stocks to historic highs

Analysts believe that investing in gold mining stocks may offer additional advantages compared to direct investment in gold. Some gold mining stocks may appreciate faster than the rise in gold prices, providing investors with a leveraged way to invest in gold. When gold prices rise, the profits of mining companies often increase accordingly. At the same time, gold mining stocks are more liquid than physical gold investments, and well-managed companies typically offer investors generous dividend returns. These advantages make gold mining stocks more resilient in a bull market.

4. Global interest rate cut cycle

Many central banks around the world are currently in a cycle of monetary policy easing. In 2024, the European Central Bank implemented its third interest rate cut of the year, and the Federal Reserve also implemented a 50 basis point rate cut in September, significantly strengthening market expectations for a global central bank monetary policy easing. It is widely predicted that the Federal Reserve may have an additional 50 basis points of rate cut space before the end of 2024. This wave of global central bank interest rate cuts helps to reduce the cost of holding non-yielding assets like gold, thus providing support for gold prices.

5. Long-term gold price stability supported by Central Bank demand

According to statistics from the World Gold Council, global central banks' net gold purchases in the first half of 2024 significantly increased to 483 tons, a 5% increase compared to the record level set in the same period last year. Additionally, a survey conducted by the organization in April found that 29% of surveyed central banks plan to increase their gold reserves in the coming year.

Furthermore, global gold ETF holdings achieved inflows for the fifth consecutive month in 2024 September, with total holdings increasing to 3,200 tons, demonstrating investors' strong interest in gold. These data collectively reflect the sustained demand for gold from global central banks and investors, as well as the appeal of gold as a safe-haven asset.

6 best gold stocks to watch for the rest of 2024

Gold stocks not only offer the opportunity for capital appreciation but also serve as a store of value during market turmoil. The following are the 6 best gold stocks to watch in the fourth quarter of 2024, selected based on market attention and recent stock performance. They are worth focusing on for Australian investors due to their strong earnings growth, solid financial condition, and leading position in the global gold mining industry.

1. Harmony Gold (HMY)

As one of the major gold producers in South Africa, Harmony Gold's stock price has increased by over 100% year-to-date. The company's net profit for the year ending June 30, 2024, increased from $275 million to $459 million compared to the same period last year; operating revenue increased from $27.7 billion to $32.8 billion. Looking ahead, Harmony Gold estimates that its production for 2024 will be between 1.4 million and 1.5 million ounces, with all-in-sustaining costs ranging from 1.02 million to 1.1 million South African Rand per kilogram.

2. Kinross Gold (KGC)

Headquartered in Canada, Kinross Gold is a gold producer that has seen its stock price increase by nearly 80% year-to-date. According to the Q2 2024 financial report, Kinross Gold's annual production exceeded 500,000 ounces, with operating cash flow of $604 million; adjusted net income was $174.7 million, or $0.14 per share. Kinross Gold achieved a significant milestone in Q2, extracting the first gold bar from the Manh Choh mine in early July.The Fort Knox plant conversion is expected to be fully operational in the third quarter, and the project remains on track to achieve planned production this year.

3. AngloGold Ashanti (AU)

AngloGold Ashanti is a global gold mining company with a stock price increase of over 70% year-to-date. Its operations span across Africa and South America, with multiple gold mines. In the first half of 2024, AngloGold Ashanti's gold production increased by 2% year-on-year to 1.25 Moz, and the adjusted EBITDA for the first half of 2024 was $1.118 billion, a 65% increase year-on-year. This demonstrates the company's efforts to improve its business fundamentals, drive productivity benefits, and manage costs.

4. Agnico Eagle Mines (AEM)

Agnico Eagle Mines, a gold mining company with operations in Canada, Mexico, Finland, and Australia, has seen its stock price increase by over 65% year-to-date. In the second quarter of 2024, the company's gold production reached 895,838 ounces, primarily driven by strong output from the Canadian Malartic, LaRonde, and Fosterville mines. The company reported a record quarterly adjusted net income of $535.3 million, marking the third consecutive quarter of record free cash flow, attributed to ongoing strong operations and cost performance.

5. Alamos Gold (AGI)

Alamos Gold, focused on the acquisition, exploration, and production of gold and other precious metals, operates in two main geographical areas, Canada and Mexico, with its stock price nearly 60% higher year-to-date. According to the second-quarter financial report for 2024, the company achieved a record gold production of 139,100 ounces; profit margins increased by 54% quarter-over-quarter; quarterly revenue was $333 million, a 27% year-over-year increase, with the full-year gold production expected to be between 550,000 and 590,000 ounces.

6. Newmont (NEM)

As a leading global gold producer with a market capitalization of $67.3 billion, Newmont has seen its stock price rise by over 44% year-to-date in 2024. The company's operations span across the United States, Canada, South Africa, Australia, and Africa, with approximately 65% of its mining revenue still coming from gold. Newmont announced its largest quarterly profit in five years, with a net profit of $924 million for the third quarter of 2024; the company's revenue reached $4.67 billion, and in the third quarter, the company produced 1.67 million ounces of gold, demonstrating its leadership and strong market performance in the gold mining industry.

How to buy gold stocks on the ASX?

The Australian Securities Exchange (ASX) offers a variety of gold stocks and Exchange Traded Funds (ETFs), allowing investors to gain exposure to the gold market by purchasing these assets. Here are the detailed steps to buy gold stocks on ASX for investor reference.

Step 1: Open a trading account:

• You need to register a stock investment account on an online investment platform that provides ASX trading services. For example, the moomoo share trading app can trade Australian stocks, US stocks, or ETFs. This usually requires you to provide some personal information and identification documents, and follow the platform's guidance to complete the account opening process.

Step 2: Fund your account:

• After the account is successfully opened, you need to deposit funds into the account. Moomoo offers a variety of fund transfer options, such as ACH transfers and bank wires, from which you can choose the most suitable funding method based on your needs and convenience. As a new moomoo user, you can also enjoy the benefits of commission-free and platform fee-free trading for Australian and US stocks for the first 180 days.

Step 3: Search for gold stocks or ETFs:

• On the moomoo securities trading platform, you can search for gold stocks or gold ETFs. Find the asset by searching for the stock name or stock code, and conduct research to ensure it is an investment product suitable for your own situation.

Step 4: Choose the type of trade:

• On any trading day, you can choose to buy gold stocks with market orders, limit orders, or stop orders. You can choose the most suitable order type based on your trading strategy.

Step 5: Monitor Your Investments:

• After the transaction is completed, you need to manage your positions and control risks, including regularly checking the price trends of stocks, changes in company fundamentals, etc., to make adjustments in a timely manner.

The above steps provide a basic framework for purchasing gold stocks on ASX. Remember, investment decisions should be based on individual research and risk tolerance, and consider market trends, company performance, and industry development.

Final thoughts on gold stocks

It should be highlighted that there is significant variation in the extent to which mining corporations can capitalise on increasing gold prices. Companies with high-grade deposits are usually able to mine more gold at lower production costs and with greater operational efficiency because they have a higher gold content per ton of ore. This means that when gold prices rise, these companies are often able to achieve higher profit margins. Additionally, the geographical location and political environment of the mining areas are also extremely important, as certain regions may offer more favorable regulatory and operational conditions, thereby enhancing the stability and growth prospects of mining companies.

While investing in gold mining stocks may yield profits, there are also certain risks involved. For investors, it is extremely important to conduct thorough research and assess their risk tolerance before making investment decisions. By combining gold stocks, physical gold, and other types of assets, one can effectively diversify investment risks and potentially enhance overall investment returns.