Popular commodities such as gold and oil are often on investors’ radars. Gold is a precious metal and has been used as a currency for thousands of years. Moreover, its global appeal has meant gold is viewed as a store of value and a hedge against inflation. On the other hand, oil fuels the modern economy and remains an attractive opportunity despite the worldwide shift towards clean energy solutions.
You can gain exposure to these commodities by investing in companies that mine gold or produce, transport, and store oil. However, investing in mining stocks or oil producers can be quite tricky as you need to consider factors such as production levels, commodity cycles, and expansion capabilities.
In this article, I aim to explore this investment landscape so that you can decide which is a better investment for your equity portfolio in 2024.
Investing in gold mining stocks
Gold mining companies mine, extract, and sell gold. However, Canada also has a few gold streaming and royalty companies that provide financing to legacy miners to extract gold for a percentage of these revenues.
Investors should understand that they are investing in a business and not in a commodity. So, it’s essential to identify companies with steady cash flow margins, low debt, rising production levels, and sustainable operating costs.
One such Canadian gold miner that ticks most boxes is Barrick Gold (TSX:ABX). Valued at a market cap of $32 billion, Barrick Gold is among the largest gold mining companies globally. In the last 15 months, geopolitical tensions and an uncertain economy have driven prices of the yellow metal higher by 15%, confirming its status as a safe-haven asset. However, Barrick Gold and its peers are trailing the performance of gold, making the stock a top investment choice right now.
Barrick confirms that it is positioned to grow its copper and gold production amid higher prices, amplifying its profit margins in a rising commodity market. Priced at 16.2 times forward earnings, Barrick Gold stock is quite low, given its earnings are forecast to grow by 30% annually in the next two years. In addition to its cheap valuation, it also offers you a dividend yield of over 2%.
Investing in oil stocks
Oil stocks such as Suncor Energy (TSX:SU) are more mature than gold stocks. Valued at $67 billion by market cap, Suncor Energy pays shareholders an annual dividend of $2.18 per share, indicating a forward yield of 4.2%. Suncor is an energy heavyweight that sells oil and natural gas. It also owns and operates gas stations under the Petro Canada brand name.
In the first quarter (Q1) of 2024, Suncor’s oil sands revenue stood at $6.9 billion while its operation cash flow grew 5.5% to $3.2 billion, indicating a margin of almost 50%.
A high cash flow margin allows Suncor to consistently raise its dividends each year. In the last 20 years, Suncor Energy has increased its dividends by 15.6% annually, showcasing an ability to thrive across market cycles.
Oil stocks seem to be a better investment choice for investors as these companies are more established than gold miners. This results in higher dividend yields and a steady expansion of these payouts.
TORONTO – Canada’s main stock index was up more than 150 points in late-morning trading, helped by strength in technology, financial and energy stocks, while U.S. stock markets also pushed higher.
The S&P/TSX composite index was up 171.41 points at 23,298.39.
In New York, the Dow Jones industrial average was up 278.37 points at 41,369.79. The S&P 500 index was up 38.17 points at 5,630.35, while the Nasdaq composite was up 177.15 points at 17,733.18.
The Canadian dollar traded for 74.19 cents US compared with 74.23 cents US on Wednesday.
The October crude oil contract was up US$1.75 at US$76.27 per barrel and the October natural gas contract was up less than a penny at US$2.10 per mmBTU.
The December gold contract was up US$18.70 at US$2,556.50 an ounce and the December copper contract was down less than a penny at US$4.22 a pound.
This report by The Canadian Press was first published Aug. 29, 2024.
The crypto market has recently experienced a significant downturn, mirroring broader risk asset sell-offs. Over the past week, Bitcoin’s price dropped by 24%, reaching $53,000, while Ethereum plummeted nearly a third to $2,340. Major altcoins also suffered, with Cardano down 27.7%, Solana 36.2%, Dogecoin 34.6%, XRP 23.1%, Shiba Inu 30.1%, and BNB 25.7%.
The severe downturn in the crypto market appears to be part of a broader flight to safety, triggered by disappointing economic data. A worse-than-expected unemployment report on Friday marked the beginning of a technical recession, as defined by the Sahm Rule. This rule identifies a recession when the three-month average unemployment rate rises by at least half a percentage point from its lowest point in the past year.
Friday’s figures met this threshold, signaling an abrupt economic downshift. Consequently, investors sought safer assets, leading to declines in major stock indices: the S&P 500 dropped 2%, the Nasdaq 2.5%, and the Dow 1.5%. This trend continued into Monday with further sell-offs overseas.
The crypto market’s rapid decline raises questions about its role as either a speculative asset or a hedge against inflation and recession. Despite hopes that crypto could act as a risk hedge, the recent crash suggests it remains a speculative investment.
Since the downturn, the crypto market has seen its largest three-day sell-off in nearly a year, losing over $500 billion in market value. According to CoinGlass data, this bloodbath wiped out more than $1 billion in leveraged positions within the last 24 hours, including $365 million in Bitcoin and $348 million in Ether.
Khushboo Khullar of Lightning Ventures, speaking to Bloomberg, argued that the crypto sell-off is part of a broader liquidity panic as traders rush to cover margin calls. Khullar views this as a temporary sell-off, presenting a potential buying opportunity.
Josh Gilbert, an eToro market analyst, supports Khullar’s perspective, suggesting that the expected Federal Reserve rate cuts could benefit crypto assets. “Crypto assets have sold off, but many investors will see an opportunity. We see Federal Reserve rate cuts, which are now likely to come sharper than expected, as hugely positive for crypto assets,” Gilbert told Coindesk.
Despite the recent volatility, crypto continues to make strides toward mainstream acceptance. Notably, Morgan Stanley will allow its advisors to offer Bitcoin ETFs starting Wednesday. This follows more than half a year after the introduction of the first Bitcoin ETF. The investment bank will enable over 15,000 of its financial advisors to sell BlackRock’s IBIT and Fidelity’s FBTC. This move is seen as a significant step toward the “mainstreamization” of crypto, given the lengthy regulatory and company processes in major investment banks.
The recent crypto market downturn highlights its volatility and the broader economic concerns affecting all risk assets. While some analysts see the current situation as a temporary sell-off and a buying opportunity, others caution against the speculative nature of crypto. As the market evolves, its role as a mainstream alternative asset continues to grow, marked by increasing institutional acceptance and new investment opportunities.
TORONTO — Canada’s investment product regulator says it imposed more than $14 million in fines and other financial enforcements in its last fiscal year.
The Canadian Investment Regulatory Organization (CIRO) says the total also includes imposed costs and the forced return of ill-gotten profits.
The regulator says it also ordered suspensions and permanent prohibitions in a significant proportion of proceedings against individuals.
Enforcement efforts included a $2 million fine against Fortrade Canada for recommending a high-risk product to unsophisticated retail clients, and a $1.7 million fine and permanent ban on securities-related business against Paul Walker for a range of misconduct including soliciting more than $1.5 million in investments for an outside business activity.
CIRO was created at the start of 2023 through a combination of the Investment Industry Regulatory Organization of Canada and the Mutual Fund Dealers Association of Canada.
The new self-regulatory organization says it is focused on harmonizing its regulatory approach to create more consistency and timeliness with enforcement action.
This report by The Canadian Press was first published July 16, 2024.
