After a sizable and consistent rally lasting the better part of two years, gold may have finally reached a limit. Achieving an all-time high near $4,400 per ounce in mid-October, gold has since pulled back to roughly $4,000.
Its year-to-date (YTD) performance is still strong at more than 48%—the S&P 500 has returned 16% in the same timeframe—but investors confident the safe haven metal would only continue to rise may be facing the possibility that this is not necessarily a given. Shifting trade policies, the threat of a major market correction, and other factors could still sway the price of gold either direction heading into the new year.
Holding the metal itself is, of course, not the only way that investors gain exposure to gold. Shares of gold mining firms provide indirect access to gold as well as potential exposure to the broader precious metals industry. While many of the leading gold miners have rallied this year at the same pace as gold itself (or at an even faster clip, in some cases), a pullback in the price of gold has already translated to a similar, though modest, decline for some of these firms. Analysts are largely bullish on several of the big players, and a sustained drop in share price could present a buy opportunity—but investors should exercise caution.
Impressive Financial Results for Barrick, But Legal and Leadership Risks Are a Factor
Barrick Gold Corp. (NYSE: B) is among the largest gold producers globally by both market capitalization and production volume, and this firm has benefited significantly from the gold rally in recent quarters.
Shares of Barrick roughly doubled so far this year, although they have fallen by more than 6% in the last month as the rally has faltered.
The firm posted strong earnings in the second quarter, including production gains in both gold and copper on a year-over-year (YOY) basis, better-than-expected revenue growth of over 16%, and free cash flow that more than doubled to $770 million.
With an influx of cash, the company was able to repurchase $268 million in shares and boosted its dividend by 50%.
With the gold rally continuing for much of the third quarter, the firm may see similar success when it posts subsequent earnings as well.
On the other hand, investors should be aware of certain risks. The company's ongoing legal dispute with the government of Mali over its mining operations in the West African nation shows no signs of being resolved. An abrupt leadership transition earlier in the fall introduces uncertainty and may even prompt renewed speculation about the possibility of a merger between Barrick and its primary rival, Newmont Corp. (NYSE: NEM).
Nonetheless, a majority of analysts—13 out of 17—see Barrick shares as a Buy, and they expect nearly 34% in upside potential going forward.
Agnico Firms Up Its Financial Footing
Another major gold mining outfit, Agnico Eagle Mines Ltd. (NYSE: AEM), has only slightly lagged behind Barrick's performance, rising by close to 92% YTD.
Agnico delivered third-quarter earnings results at the end of October, including record performance across multiple categories.
The firm produced an impressive 867,000 ounces, generating $1.1 billion in adjusted earnings and $2.1 billion in adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA).
This boon has also allowed Agnico to reward its shareholders.
The company returned $350 million to stock owners last quarter while also reducing its debt by $400 million.
Agnico's strengthened position should insulate it if gold prices fall, but it still faces higher-than-usual royalty costs as well as a cash tax payment of $1.2 billion due in the first quarter of 2026. The company could boost production—plus expenses, at least in the near-term—thanks to its aggressive expansion with 120 new drill rigs in the first nine months of the year.
Investors are likely to appreciate the possibility of an enhanced dividend and attractive expansion prospects; analysts certainly do, with 16 out of 17 naming AEM a Buy with nearly 18% in upside potential.
Alamos Faces Production Challenges, But Cash Influx Should Help
Alamos Gold Inc. (NYSE: AGI) is much smaller than the other two firms above and has only climbed by 57% YTD.
Although the firm saw record free cash flow for the latest quarter as well as a healthy $462 million in revenue, it faces production challenges.
Despite calling for an 18% increase in production for the final quarter, Alamos is reeling from a week-long outage at one of its mills and a separate seismic event that has prompted management to reduce full-year production guidance by about 6%.
Alamos also recently completed the sale of its Turkish subsidiary for $470 million, freeing up substantial cash to direct toward expanding both its geographic presence and its production.
Although near-term costs will be high, as Alamos recovers its production following the events of earlier in the year it has the potential to continue to rise. AGI shares received a unanimous Buy from 12 analysts with a possible upside of almost 36%.
Where Should You Invest $1,000 Right Now?
Before you make your next trade, you'll want to hear this.
MarketBeat keeps track of Wall Street's top-rated and best performing research analysts and the stocks they recommend to their clients on a daily basis.
Our team has identified the five stocks that top analysts are quietly whispering to their clients to buy now before the broader market catches on... and none of the big name stocks were on the list.
They believe these five stocks are the five best companies for investors to buy now...
The article "Can Gold Mining Stocks Shine as the Metals Rally Falters?" first appeared on MarketBeat.
