5 Gold Mining Stocks With the Strongest Relative Performance

Gold stocks have been on the upswing as a hedge against market volatility and global recession fears, observes Clif Droke, contributing editor to Cabot Wealth Daily; here, he reviews the 5 best gold mining stocks ranked by relative performance. While most commodities are in a slump due to a weak global economy, gold has outperformed -- and even benefited -- from this weakness. Gold is not only poised to further benefit from continued economic weakness, but should also outperform even when the economy returns to normal. For this reason, investors should consider having some exposure to gold by owning shares in some of the biggest and best-performing gold mining stocks. It's no secret that gold has soared during the last few months as safe-haven demand for the metal has exploded in the wake of Covid-19, while demand for other goods and services has dropped. Many are also concerned that the unprecedented amounts of money created by central banks to prop up vulnerable financial markets could lead to inflation. Not surprisingly, investors have turned to gold and gold-related assets -- including and especially gold mining stocks -- to defend against this possibility. Gold mining stocks are an excellent way to leverage a bull market in the physical metal since the shares of gold exploration and mining companies will typically experience superior percentage gains compared to the metal's price. Before we take a look at some of the best-performing gold mining stocks, allow me to explain why the longer-term outlook for gold is so promising. The first thing to consider is that even as currencies all over the world are being inflated to stimulate economies ravaged by Covid-19, global gold supplies are trending in the opposite direction. The World Gold Council estimates that world gold production in 2019 was down for the first time in over a decade, thanks to diminished mining output. What's more, newly discovered gold deposits have also declined over the last three decades along with gold reserves for the firms that mine the metal. From a fundamental perspective, all these factors combine to form a positive backdrop for gold to appreciate vis-à-vis the major currencies. Then there are the economic factors involved in a gold bull market. The yellow metal has historically benefited from an extremely weak economy since investors will naturally look for a safe place to park their money in tough times. With so much uncertainty swirling around the global trade outlook today, investors are more focused on capital preservation than with capital gains. They've subsequently turned to gold since it has a proven track record of holding its value exceptionally well over time regardless of the prevailing economic climate. A look back at the metal's long-term performance shows that gold indeed tends to benefit from a weak economic outlook. The proof of this can be seen by gold's outstanding performance from 2008-2011 following the global recession, and again in 2018-2020, when deflationary undercurrents were sweeping across some of the world's biggest economies. Now, as then, gold has outperformed versus equities and is performing well as a hedge against economic uncertainty. Already it has commenced a new bull market (up 21% since March) and is the hands-down leader among all major assets. If history repeats -- and we think it will -- investors can expect a continued strong performance from gold in the months and years to come. But gold has another important benefit aside from being a crisis hedge; its value has also historically increased whenever inflation has been a major problem. This held true during the late 1970s, at a time when runaway inflation wracked the U.S. economy. More recently, gold performed well from 2002-2007 when commodity prices were booming due to massive wartime spending and a rapid decline in the U.S. dollar's value. While deflation has reared its ugly head from time to time in the years since then, its evil twin, inflation, was nowhere to be found in the U.S. economy. That could soon change, however, in the wake of the global coronavirus pandemic. Inflation has been defined as too much money chasing too few goods, and with central banks printing money virtually nonstop (and industrial production isn't keeping up with the pace of money creation), inflation looks to become a growing threat. So, no matter how you look at it, there are good reasons to believe that gold's bull market will continue well into the foreseeable future. Having said that, let's now turn our attention to some gold mining stocks that are poised to benefit from gold's latest bull market. Among the key attributes we want to see when evaluating future prospects for the gold miners is solid earnings and revenue growth, attractive all-in sustaining costs per ounce (a measure of how cheaply a firm can mine gold) and strong relative performance versus the benchmark S&P 500 Index. With that in mind, here's our list of the best-performing gold mining stocks ranked by relative performance. Each of these companies is positioned to benefit from a secular gold bull market. (Editor's note: Those interested in these stocks should be aware that these companies are scheduled to report earnings this week.) #5: Franco-Nevada One of the world's leading gold royalty and streaming companies is Franco-Nevada, headquartered in Toronto, Canada. Franco's main business is streaming, which means it provides up-front payments to miners in exchange for the right to buy gold and other resources at a set price. Its extensive portfolio includes some 300 royalties in gold, silver and platinum metals mining (two-thirds) and oil/gas projects (one-third). With financing likely to become harder to come by during the economic downturn, miners will increasingly turn to companies like Franco to provide money to sustain their operations; and in exchange for providing assistance, Franco can leverage downturns to grow its portfolio in exchange for cash. Business is still good for Franco despite the global economic slump, so it should be able to continue its growth trend in the coming months and years as long as gold prices remain buoyant. #4: Kinross Gold Kinross Gold is a senior company that acquires, explores and develops gold properties in the U.S., Russia, Brazil, Chile, Ghana and Mauritania. Kinross possesses an impressively strong balance sheet compared to most gold miners, including $2 billion in available liquidity. The firm's all-in sustaining cost per ounce is around $970, which means it can mine at a considerable discount to the current gold price. KGC's stock price is also much lower than most senior miners listed on U.S. and Canadian exchanges, so it's definitely worth considering for small investors looking to leverage a gold bull market. #3: Wheaton Precious Metals Companies that mine silver also stand to benefit from rising gold prices due to the close connection between the two metals. Wheaton Precious Metals is the world's largest silver streaming company, with 14 silver purchase agreements, as well as gold and palladium agreements. Wheaton focuses mainly on high-quality, high-margin operations with a goal of returning a minimum of 30% of cash flow to its shareholders, with the remainder used to grow the company. It has significant cash flow ($500 million in 2019) and manageable debt levels, and is well positioned to fund commitments and contingencies, including dividends. With gold and silver prices on the upswing, Wheaton should benefit from the explosive growth in safe-haven demand for the metals. #2: Barrick Gold No discussion of the leading miners would be complete without mentioning Barrick Gold, one of the bluest of the blue-chip senior mining companies. Its revenue, net income and free cash flow have seen impressive upward trends since bottoming in 2018. Higher gold prices have also made growth through M&A attractive for miners once again, and after Barrick recently merged with Randgold Resources, it further combined its Nevada mining assets with Newmont Mining to create the joint venture company Nevada Gold Mines, the world's largest production complex. Barrick forecasts that its all-in sustaining costs, a key metric for miners, stands at $945 per ounce, well below current gold prices; this gives the firm plenty of leeway to take on additional projects. Consequently, analysts predict sales and earnings up 12% and 33%, respectively, in 2020. #1: Newmont Mining The world's largest, and arguably most famous, gold miner is Newmont Mining, which owns gold mines in nine different countries spanning three continents. Newmont's revenues have been growing thanks to rising gold prices, a trend which analysts expect to continue in the coming quarters. It's also one of the best-performing blue-chip miners today, with its share price having already risen 55% since March. The company also recently hiked its dividend by 79% to underscore its commitment to enhancing shareholder value, and announced a share repurchase plan up to a total of $1 billion (it retired $506 million in stock via repurchases in the fourth quarter of 2019). We see the stock continuing its role as a top performer among precious metal miners in the current gold bull market. Based strictly on relative performance, these are five of the best-performing precious metals mining stocks in the U.S. equity market right now. They also stand to benefit from a sustained rising trend in gold prices. While past performance doesn't guarantee future results, it usually pays to follow the path of the smart money traders and institutional investors. And the gold stocks mentioned above appear to be among the favorites of this market-moving crowd.

5 Gold Mining Stocks With the Strongest Relative Performance

Investors should consider exposure to gold through some of the biggest and best-performing gold mining stocks. Here's a starting point.

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