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Gold Below $1,800: 3 Different Ways to Invest Now

After reaching an all-time high in March 2022, the price of gold retreated below $1,700 an ounce on July 21 as a strong U.S. dollar outweighs gold’s luster. Since then, gold has staged a small rebound and is now down only around 1% year to date — which is far better than the S&P 500Dow Jones Industrial Average, Nasdaq Composite, and many top individual stocks.

Here are three different ways to invest in gold now.

Image source: Getty Images.

1. Top gold ETFs

Gold exchange-traded funds (ETFs) provide a means of investing in the yellow stuff without the hassle of physically holding gold coins or bars — which can be a security risk and often costs a hefty premium above the spot price.

Two well-known gold ETFs are the SPDR Gold Shares ETF and the iShares Gold Trust, which have net assets of $61.34 billion and $29.8 billion, respectively. The iShares Gold Trust has a lower expense ratio (0.25% compared to 0.4% for SPDR Gold Shares) and a lower nominal price of around $33.53 per share compared to $164.5 per share for the SPDR fund. Other than that, both funds effectively function the same way, which is by holding and insuring physical gold in a trust. As of July 28, 2022, the iShares Gold Trust held 501.4 metric tons of gold or 16.120 million ounces. 

2. A basket of mining stocks

A risker way to invest in gold is through gold miners like Newmont Corporation (NYSE: NEM) and Barrick Gold. These miners make up over 35% of the VanEck Gold Miners ETF, which has 54 total holdings. The fund is one of the largest gold ETFs out there, with a market cap of $10.93 billion. However, it’s down 20% year to date and nearly 40% from its all-time high as gold mining stocks heavily depend on a strong gold price.

Each miner has its fair share of firm risk that can lead to unexpected outcomes. For example, just last week, New Gold‘s key mines were affected by adverse conditions — causing the stock to plunge over 30% in the first hour of trading on July 12. The VanEck ETF spreads that risk over several miners across different geographies while only charging a 0.51% fee for its services.

3. A top miner with a high yield

There’s a reason why Newmont is the largest holding in the VanEck Gold Miners ETF. It has by far the largest market cap of any U.S.-based gold mining stock — coming in at around a $36.1 billion market cap compared to second place Barrick Gold. 

Newmont has a presence in Africa, Australia, North America, and South America. And that alone gives it a diverse portfolio that is unrivaled in the industry.

Newmont also has a $0.55 per-share quarterly dividend, representing a dividend yield of around 4.8%. Newmont’s function as a source of passive income helps offset some of the cyclicality in the gold industry. What’s more, the main reason investors may choose not to invest in gold is because it doesn’t have a dividend, which is a greater opportunity cost during times of higher interest rates.

It’s worth mentioning that Newmont’s dividend can vary based on the state of the industry. But the dividend has been on the rise for the last five years even as gold as staged relatively weak returns. 

Newmont offers further upside by occasionally paying special dividends. In 2019, Newmont paid a one-time $0.88 per-share special dividend. 

Newmont stock is down 47% from its 52-week high after missing earnings expectations, but the company’s position remains strong for investors looking for a long-term play in the gold mining industry. 

Gold is a good buy now

Given the sell-off across many excellent stocks, investors should by no means sell stock to buy gold. Rather, now could simply be a good time to dollar-cost average into gold and make it a small percentage of a diversified portfolio. The simplest way is through a gold ETF that tracks the price of gold. However, investing in a basket of mining stocks or Newmont could be an option for investors with a sizable existing gold position or a higher risk tolerance. Either way, gold and most gold miners are currently around 52-week lows and could be worth buying now.

Daniel Foelber has positions in iShares COMEX Gold Trust and has the following options: short October 2022 $35 calls on iShares COMEX Gold Trust. The Motley Fool has positions in and recommends S&P Global. The Motley Fool has a disclosure policy.

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