Should You Buy the Best Gold Stocks?

Just this week, gold hit a new all-time high as it closed above $3,000 per ounce. Prices have never been this high in all of human history. So that’s like hitting a 200,000 year high, which is really impressive. But with prices at all time highs, is it still a good idea to buy gold and gold stocks? Only if you’re buying the best gold stocks…

But before I break down the industry into the individual companies and give you a list of the best gold stocks, let’s take some time today to list all the reasons investors might want to get exposed to gold right now before prices get any higher…

Why Gold?

Gold and the best gold mining stocks offer a unique blend of stability, inflation protection, crisis hedging, and profit potential.

So whether you're looking for a safety net against economic chaos, a hedge against inflation, or exposure to the commodity supercycle, gold and the best gold mining stocks remain some of the most compelling investment opportunities.

Economic Uncertainty and Market Crashes

Global markets are experiencing heightened volatility due to escalating geopolitical tensions, particularly in the Middle East, and ongoing trade disputes initiated by U.S. President Donald Trump. These factors have led investors to seek safe-haven assets, propelling gold prices to record highs above $3,000 per ounce.

• Gold has historically acted as a safe-haven asset during stock market downturns.
• Investors flock to gold during recessions and financial crises, driving up its price.
• Gold held or increased its value during major crashes (2008 financial crisis, COVID-19 crash, etc.).

Inflation Hedge

The imposition of new tariffs by the U.S. has raised concerns about rising inflation. Investors are turning to gold to preserve purchasing power, as it traditionally serves as a hedge against inflationary pressures.

• Gold tends to retain purchasing power over time.
• When inflation rises, fiat currencies lose value, but gold usually appreciates.
• Gold has outperformed many assets in high-inflation periods.

Geopolitical Risk

Recent conflicts, such as the Israeli airstrikes against Hamas in Gaza, have intensified geopolitical risks. Such instability often drives investors toward gold, reinforcing its status as a safe-haven asset.

• Wars, trade conflicts, and political instability drive investors toward gold.
• Countries with weak governance or civil unrest often see local gold demand surge.
• Gold demand spikes during international tensions (e.g., Russia-Ukraine conflict).

Central Bank Buying

Central banks continue to diversify their reserves by purchasing gold. In 2024, global gold demand reached a record high, with central bank buying exceeding 1,000 tonnes for the third consecutive year.

• Central banks worldwide hold gold as part of their reserves.
• Many countries (China, Russia, India) have been increasing gold reserves in recent years.
• Central bank purchases support long-term price appreciation.

Currency Devaluation and Weakness

The U.S. dollar has weakened amid trade tensions and fiscal concerns, making gold more attractive as an alternative store of value. This inverse relationship between the dollar and gold prices has been evident in recent market movements. But it’s not just the dollar. Over the past few years, gold has detached from nearly all fiat currencies:

• Gold often rises when the U.S. dollar or other major currencies weaken.
• Competitive devaluations (e.g., Japan, China, EU monetary policies) make gold more attractive.
• Countries with hyperinflation (e.g., Venezuela, Argentina) see surging gold prices.

Supply Constraints and Peak Gold

Challenges in gold mining, including environmental concerns and regulatory hurdles, have constrained supply. For instance, Scotland's only gold mine is finally set to resume operations under new ownership, highlighting the difficulties in maintaining consistent gold production. And the all-in sustainable cost (AISC) of gold extraction has been rising for nearly a decade:

• Gold mining is expensive and resource-intensive.
• Many high-grade gold mines are depleting, limiting future supply.
• New discoveries are rare, making existing gold reserves more valuable.

Rising Demand From Emerging Markets

In countries like India and China, investment demand for gold remains robust despite high prices. Gold ETFs in India have seen healthy inflows, reflecting sustained investor interest.

• China and India represent 50% of global gold demand, making them the largest gold consumers (jewelry, investment).
• The rising middle class in developing nations boosts gold demand.
• Cultural and religious affinity for gold ensures consistent long-term demand.

Protection Against Negative Real Interest Rates

With central banks maintaining low-interest-rate policies to support economies, real interest rates remain low or negative. This environment enhances the appeal of non-yielding assets like gold.

• When interest rates are low or negative, gold becomes more attractive since it has no yield.
• Investors seek gold as a store of value when bonds and cash offer poor returns.
• Negative real rates (inflation higher than interest rates) favor gold investment.

Diversification and Portfolio Stability

Amid stock market volatility, gold's low correlation with equities has reinforced its role as a diversification tool, helping to stabilize investment portfolios.

• Gold has a low correlation with stocks and bonds.
• Adding gold to a portfolio reduces overall risk and volatility.
• Institutional investors recommend holding 5%–10% of assets in gold.

Hedge Against Government and Policy Risks

Unpredictable government policies, such as sudden tariffs and sanctions, have increased the appeal of gold as a hedge against policy-induced economic disruptions. And with trade policy changes coming seemingly daily right now, we’ve definitely got some policy risk:

• Governments can freeze bank accounts (remember the trucker protests in Canada) or implement capital controls, but gold remains an independent store of value.
• Rising government debt and excessive money printing weaken confidence in fiat currencies, something you can see happening right this instant.
• Bail-ins and financial repression policies make physical gold an attractive wealth preservation tool.

Technological and Industrial Demand

While industrial demand constitutes a smaller portion of gold usage, technological advancements continue to require gold for various applications, supporting its demand.

• Gold is used in electronics, aerospace, and medical applications.
• Rising demand for tech products (smartphones, semiconductors) increases industrial gold use.
• Green energy and space exploration could create new demand for gold.

Gold Miners as Leverage to Gold Prices

Gold mining companies often experience amplified gains relative to the gold price. The recent surge in gold prices has positively impacted mining stocks, offering leveraged exposure to the metal's performance.

• Gold mining stocks typically offer higher returns than physical gold in bull markets.
• Miners benefit from rising gold prices through increased revenues and profit margins.
• Gold mining ETFs provide diversified exposure to gold miners.

Dividends From Gold Mining Stocks

Some gold mining companies have increased dividends in response to higher profits from rising gold prices, providing income to investors alongside capital appreciation.

• Some gold miners pay dividends, offering cash flow in addition to capital appreciation.
• Established miners like Newmont and Barrick Gold provide consistent shareholder returns.
• Higher gold prices often lead to increased dividends.

Protection Against Financial System Failures

Concerns about the stability of the financial system, exacerbated by high debt levels and economic uncertainties, have led investors to seek refuge in gold, which is not subject to the same risks as fiat currencies.

• If banking systems collapse, gold remains a tangible, universally recognized asset.
• Physical gold cannot be "erased" like digital money in a financial crisis.
• Gold-backed assets offer protection against systemic banking failures.

Strategic and Military Importance

Gold's role as a strategic asset has been underscored by central banks' continued accumulation, reflecting its importance in national reserves amid geopolitical tensions.

• Gold is a critical asset for national security reserves.
• Countries hold gold as a hedge against economic warfare.
• Central banks diversify away from the U.S. dollar by accumulating gold.

Long-Term Store of Value

Gold's enduring value over millennia continues to attract investors seeking a reliable store of wealth, especially during times of economic uncertainty.

• Gold has been used as money for thousands of years.
• Unlike fiat currencies, gold cannot be printed or manipulated by central banks.
• Gold has survived every major economic collapse in history.

Crypto and Digital Gold Narrative

While cryptocurrencies have gained attention, gold remains a tangible asset with a long history, appealing to those cautious of digital asset volatility.

• Some investors see gold as the "original Bitcoin" and a hedge against fiat currency risks.
• Tokenized gold is gaining popularity, merging physical gold with blockchain security.
• Gold remains tangible and less volatile than cryptocurrencies.

Rising ESG Awareness in Gold Mining

The gold mining industry is increasingly adopting environmentally and socially responsible practices, aligning with the growing emphasis on ESG factors among investors.

• Some mining companies are adopting environmentally friendly and sustainable practices.
• Carbon-neutral mining initiatives could attract ESG-focused investors.
• Ethical gold sourcing programs improve gold’s reputation in sustainable finance.

A Lot of Reasons to Love Gold

As you can see, there are a ton of reasons to love gold other than how pretty it looks when hammered into jewelry. And every single reason fits into today’s global economic and geopolitical landscape.

We’ve got tensions flaring, inflation sticking, central banks buying without abandon, protests closing mines, mining costs accelerating, fiat currencies weakening…

But the thing is that while gold has had an impressive rally over the past three years or so, it’s not even started with its ascent.

And that’s because right now it’s still mostly central bank buying that’s pushing the price of the metal higher. Institutions and retail investors are still mostly sitting this one out.

That’s why gold prices have soared but the prices of the best gold stocks have languished:

Central banks buy physical gold. They don’t buy gold mining stocks. But institutions do. And so do retail investors. And when they come into this market…

Watch out! Because there’s going to be a MASSIVE rally in the best gold stocks as both Wall Street and Main Street race to get invested.

So make sure you keep an eye out for my next article where we’ll break down some of the best gold stocks on the market to get you exposure to the monster rally all but guaranteed to be coming down the pike.