2 top gold stocks I’d buy right now

Bilaal Mohamed reckons these two gold miners could add a little sparkle to your portfolio.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

South African precious metals group Pan African Resources (LSE: PAF) saw its profits take a dive as higher production costs and a number of operational challenges impacted full-year results for its 2017 financial year.

Operational challenges

The AIM-listed gold miner said that pre-tax profits had slipped to £23m from £33.9m for the 12 months to 30 June, despite a 5.1% rise in group revenue to £169.6m over the same period. Profits were hit by higher production costs which rose from £100.5m to £134m as a result of salary and wage increases, as well as higher electricity costs.

But the group was also hit by significant operational challenges during the year, with production suspended at its Evander mines for 55 days to carry out critical shaft infrastructure refurbishments, and frequent instances of community unrest resulting in lower production at its Barberton mines. Consequently, gold production was down 15.4% on the previous year to 173,285oz, compared to 204,928oz in 2016.

Recovery play

Perhaps unsurprisingly, Pan African’s share price has suffered as a result of the recent issues, shedding 30% of their value in just 12 months. Investors will no doubt have been spooked by the operational difficulties and higher production costs. But management has since taken remedial action and expects a much improved performance in the 2018 financial year, together with a substantial increase in expected gold production.

With the promise of a significant improvement in performance in the coming year, and a price-to-earnings ratio down to just seven, I believe Pan African could be the perfect stock for gold bulls on the lookout for a potential recovery play.

Political and economic turmoil

It’s no secret that mining stocks can be high-risk investments, particularly the smaller Aim-listed resource companies like Pan African. Yes, there are huge profits to be made, but share prices can often suffer from extremely high levels of volatility and investors can suffer huge losses if the timing isn’t quite right.

It’s for this reason that many gold bugs prefer to invest in the larger miners such as Randgold Resources (LSE: RRS). With a market value of around £6.8bn the Africa-focused miner is easily the largest pureplay gold miner on the London Stock Exchange. As with most mining stocks, Randgold’s share price is highly geared to the price of the precious metal it mines. So in effect, the shares are a play on the price of gold.

In times of political and economic uncertainty such as these, investors often turn to the yellow metal as a safe haven. But Randgold’s shares are far from cheap, currently trading on a high earnings multiple of 30. Nevertheless, with Donald Trump in the White House, the threat of political and economic turmoil is never too far away, and gold bulls may well have the last laugh.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Bilaal Mohamed has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Playful senior couple in aprons dancing and smiling while preparing healthy dinner at home
Investing Articles

Dividend deals! 2 passive income stocks that still look undervalued

Royston Wild explains why these FTSE 250 passive income stocks might STILL be too cheap to miss, despite theirrecent price…

Read more »

Middle-aged Caucasian woman deep in thought while looking out of the window
Investing Articles

Is BT Group one of the FTSE 100’s greatest value shares?

BT's share price looks like a bargain when you look at the P/E ratio and dividend yield. Is it one…

Read more »

Frustrated young white male looking disconsolate while sat on his sofa holding a beer
Investing Articles

The National Grid share price just plunged another 10%. Time to buy?

The National Grid share price is one of the FTSE 100's most stable, and nothing much happens to it? Well,…

Read more »

Young Black woman looking concerned while in front of her laptop
Investing Articles

Up 15% in 3 months, but I still won’t touch Vodafone shares with a bargepole

Harvey Jones has been shunning Vodafone shares for years. The FTSE 100 stock is finally showing signs of life, but…

Read more »

Growth Shares

This UK stock could be like buying Nvidia in 2021

Jon Smith thinks he's missed the boat with Nvidia shares, but flags up a UK stock that has some very…

Read more »

Businesswoman calculating finances in an office
Investing Articles

The FTSE 100’s Intertek delivers a bullish update — can the share price soar?

I’d describe Intertek as a quality business with a decent dividend income, but will the share price shoot the lights…

Read more »

Market Movers

Up another 10% yesterday, how high can the Nvidia share price go?

Jon Smith talks through the latest results but flags up why further gains could be harder to come by for…

Read more »

Investing For Beginners

Down 43% in a year, I think this value stock is primed for a comeback

Jon Smith flags up why a FTSE 250 share has fallen so much in the recent past, but explains why…

Read more »