5 Best Gold Mining Stocks to Buy in July 2021

Gold prices have whipsawed in 2021 as fears of a rate hike and the strong economic outlook has dampened gold’s safe-haven appeal. Gold mining companies are a leveraged play on gold prices.

Miners tend to rise or fall more than the movement in gold prices. What’re the five best gold mining stocks that you can buy in July 2021.

Outlook for gold prices

To begin with, let’s analyze the outlook for gold prices in 2021. For gold mining stocks, gold prices tend to be the biggest driver. Talking of gold, prices peaked last year and even crossed their 2011 highs. However, since then prices have traded with a negative bias as investors pivoted towards stocks of cyclical companies. The strong economic data and fears of sooner than expected rate hike by the US Federal Reserve also negatively impacted gold prices. As a non-interest-bearing asset, gold tends to do in a low interest rate environment. The fall in gold prices also triggered a sell-off in gold mining stocks.

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Commodities are in a cyclical upswing

Jim Wyckoff, senior analyst of Kitco News believes that while gold could be in a short-term downtrend, it should go up in the long term. “I really don’t think [Fed action] makes a whole lot of difference for the near-term and I’ll tell you why. Commodities are highly cyclical, and I think you are in a longer-term upswing cyclically, in the raw commodities sector. We’ve seen crude oil prices this week hit a two and a half year high, we’ve seen copper is not far below its 10-year high, so I think we’re seeing a cyclical upswing,” said Wyckoff.

David Lennox of Fat Prophets sees gold prices rising to new highs in 2021 and pointed to high inflation readings and the possibility of a weaker US dollar, both of which are bullish drivers for gold prices. Here are the best gold mining stocks to buy now.

1. Barrick Gold (NYSE: GOLD)

Barrick Gold is among the largest gold mining stocks and last year even Berkshire Hathaway took a small stake in the company which it subsequently liquidated. The stock is down over 15% so far in 2021 and looks like a good gold mining stock to buy now.

Why Barrick is a good gold mining stock to buy

GOLD has a median target price of $29 which is an almost 40% premium over current prices. Of the 22 analysts covering the stock, 18 rate them as a buy while the remaining four rate them as a hold. Looking at the technicals, the stock trades below the 50-day, 100-day, and 200-day SMA. The 100-day SMA (simple moving average) has been resistance for the stock and it hasn’t been able to break above the level. The 14-day RSI (relative strength index) of 41.5 is a neutral indicator.

Meanwhile, Barrick looks like a good gold mining stock to buy considering its competitive cost position. The stock trades at an NTM (next-12 months) EV (enterprise value)-to-EBITDA (earnings before interest, tax, depreciation, and amortization) of 6x which looks attractive.

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3. Newmont Corporation (NYSE: NEM)

Newmont Corporation is the world’s largest gold mining company. The stock is down 2.2% so far in 2021 and is underperforming the S&P 500 but is outperforming many other gold mining stocks. Looking at the technicals, NEM stock trades below the 50-day, 100-day, and 200-day SMA. The stock has been facing strong resistance at the 100-day SMA. Meanwhile, after the crash, it getting near the oversold zone with a 14-day RSI of 34. RSI values below 30 signal oversold levels while values above 70 signal overbought levels.

NEM looks like a good gold mining stock to buy

NEM has a median target price of $75 which is a 21.5% premium over current prices. Its lowest and highest target prices are $60 and $86.42 respectively. Of the 19 analysts polled by CNN Business, 14 rate NEM as a buy while four rates it as a hold. One analyst has a sell rating on the stock. The stock trades at an NTM EV-to-EBITDA of 6.6x which looks reasonable.

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3. Kinross Gold Corporation (NYSE: KGC)

Kinross Gold Corporation is a Canadian mining company. The stock is down 22.3% so far in 2021 and the recent fall looks like an opportunity to buy this gold mining stock. KGC has a median target price of $10 which implies an upside of 61% over current prices. Of the 19 analysts covering the stock, 14 have rated NEM as a buy while the remaining five analysts have a hold rating on the stock.

KGC looks like a good gold mining stock to buy

KGC has an increasing production profile and looks like a good gold mining stock to buy. After the recent crash, the stock trades below the 50-day, 100-day, and 200-day SMA which is a bearish technical indicator. The stock could however be getting near the oversold zone with a 14-day RSI of 35.7. The stock trades at an NTM EV-to-EBITDA multiple of 4.2x which looks attractive.

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4. Franco-Nevada (NYSE: FNV)

FNV is also based in Canada. However, it is not a gold mining stock but a streaming company. Typically, streaming and royalty companies like FNV enter into agreements to receive production from mining companies. Apart from gold, FNV also does streaming deals for silver and platinum group metals but gold is the key driver for the company and last year 70% of its revenues came from gold.

Streaming companies are generally less risky than gold mining stocks as they don’t face the operational and cost pressures that gold mining companies face. Incidentally, mining companies have been facing higher costs as prices for inputs like diesel has gone up. There has also been wage inflation that has hurt gold mining stocks.

FNV is outperforming gold mining stocks

FNV is outperforming gold mining stocks in 2021 and is up over 15% so far. The stock looks in a technical uptrend and trades above the 50-day, 100-day, and 200-day SMA. In May, there was a golden cross formation in the stock which happens when the 50-day SMA crossed above the 200-day SMA and is seen as a bullish technical indicator. The stock trades at an NTM EV-to-EBITDA multiple of 25.2x which is in line with its five-year averages.

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5. Freeport-McMoRan (NYSE: FCX)

Freeport-McMoRan is not a gold mining stock per se but it is among the major gold miners globally thanks to its Grasberg mine. The gold and copper production at the mine will ramp up over the next couple of years as the company transforms it from an overground mine to an underground one. The company produced 0.9 million ounces of gold in 2020 which it expects to rise to 1.3 million ounces in 2021 and gradually rise to 1.8 million ounces by 2023.

FCX is a good stock to play gold mining

Meanwhile, Wall Street analysts are bullish on Freeport-McMoRan stock and its median target price of $45 implies an upside of 35.5% over current prices. Its lowest target price is $17 which is a discount of over 49% while the highest target price of $60 is a premium of 81% over current prices.

Of the 19 analysts polled by CNN Business, 13 rate FCX stock as a buy while five rates it as a hold. Only one analyst has a sell or equivalent rating on the stock.

Earlier this month, Barclays turned bearish on Freeport-McMoRan stock and downgraded it from equal weight to underweight, and assigned a target price of $29. Analyst Matthew Murphy expects margin pressure in the near term amid cost-push inflation.

FCX stock trades at an NTM EV-to-EBITDA multiple of 5.6x. The multiples look attractive and FCX looks like a good stock to play the gold mining industry given its low-cost operations, strong balance sheet, and rising production profile.

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