The Motley Fool

3 gold mining stocks to buy today

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.

Diggers and trucks in a coal mine
Image source: Getty Images.

Gold mining stocks Polymetal (LSE: POLY), Fresnillo (LSE: FRES) and Centamin (LSE: CEY) are among the worst performers on the London market in 2021 but I’m anticipating a comeback over the next year or so. 

Miners are as varied in performance this year as are the kinds of minerals they extract from the earth, and while I think the mismatch results from differing commodity price changes and company performances, gold mining stocks are by the far the laggards. 

5 Stocks For Trying To Build Wealth After 50

Markets around the world are reeling from the coronavirus pandemic… and with so many great companies trading at what look to be ‘discount-bin’ prices, now could be the time for savvy investors to snap up some potential bargains.

But whether you’re a newbie investor or a seasoned pro, deciding which stocks to add to your shopping list can be a daunting prospect during such unprecedented times.

Fortunately, The Motley Fool UK analyst team have short-listed five companies that they believe STILL boast significant long-term growth prospects despite the global upheaval…

We’re sharing the names in a special FREE investing report that you can download today. And if you’re 50 or over, we believe these stocks could be a great fit for any well-diversified portfolio.

Click here to claim your free copy now!

Fresnillo was bottom of the FTSE 100 this week after falling 27% in the almost-six months to late June while Pretty Poly(metal) was eighth from bottom of the same benchmark despite falling only around 4.4%. Meanwhile, a 12.1% fall has left Centamin tenth from bottom of the FTSE 250.

All of this follows a period in which gold itself has fallen 6.37% to $1,778 per ounce and so, with the exception of Polymetal, these performances seem like an overreaction to a gold price that could soon bounce back in the direction of record highs seen above $2,000 in July 2020. 

Gold price per ounce with share prices of Polymetal, Fresnillo and Centamin.

Gold price per ounce with share prices of Polymetal, Fresnillo and Centamin.

Most compelling among reasons for a gold price recovery, I find, is central bank demand and what it potentially says about the expected direction of an often-negatively correlated U.S. Dollar. However, a seemingly downbeat outlook for the latter is also a reason on its own. 

Many central banks have grown reserve assets of late, and may have somewhat similar views on big questions like the Dollar and by implication, gold, though not all publish data as detailed as the Reserve Bank of Australia (RBA). The RBA grew FX reserves and total reserves by nearly 15% in March, with growth in those categories slowing markedly thereafter, while gold holdings have since increased at double-digit percentages, despite falling prices.

Nothing can be said for certain but this might reflect the expectation of rising gold prices from which I think Fresnillo and Centamin would benefit more than Polymetal, given the latter is less volatile than others. 

U.S. Dollar Index shown alongside gold price per ounce

U.S. Dollar Index shown alongside gold price per ounce

Russia’s Polymetal is better at mimicking gold prices, which are less volatile than many shares, potentially making it a lower-risk sector exposure, while Fresnillo is a ‘high cost producer’ and the lowest margin company in the sector whose shares tend to overreact more to movements in gold.

This makes it higher risk, but also potentially a higher reward: the shares have underperformed sector peers when falling more than 40% from above £13:00 last July, a period in which gold itself has fallen by only around 15%, but did also respond more strongly when prices were rallying last year. 

Fresnillo far outpaced gold and its peers in 2020, but I won’t be writing off Centamin as a dark horse contender for outperformance in any gold price recovery, given the debt-free company’s shares have been held back this year by one of many occasional production stoppages at its flagship mine.

Centamin also still has scope to offer a best-in-class 6% dividend yield – better explained here by G A Chester – along with magnified exposure to any gold price recovery, although it goes almost without saying that each of these shares could perform badly if gold prices fall further.

There’s a ‘double agent’ hiding in the FTSE… we recommend you buy it!

Don’t miss our special stock presentation.

It contains details of a UK-listed company our Motley Fool UK analysts are extremely enthusiastic about.

They think it’s offering an incredible opportunity to grow your wealth over the long term – at its current price – regardless of what happens in the wider market.

That’s why they’re referring to it as the FTSE’s ‘double agent’.

Because they believe it’s working both with the market… And against it.

To find out why we think you should add it to your portfolio today…

Click here to get access to our presentation, and learn how to get the name of this 'double agent'!

James Skinner does not have a position in any shares mentioned in this article. The Motley Fool UK has recommended Fresnillo. 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.

Our 6 'Best Buys Now' Shares

Renowned stock-picker Mark Rogers and his analyst team at The Motley Fool UK have named 6 shares that they believe UK investors should consider buying NOW.

So if you’re looking for more stock ideas to try and best position your portfolio today, then it might be a good day for you. Because we're offering a full 33% off your first year of membership to our flagship share-tipping service, backed by our 'no quibbles' 30-day subscription fee refund guarantee.

Simply click below to discover how you can take advantage of this.