Why are Gold Stocks Surging?

On October 21, gold started the week hitting fresh highs, floating around $2,750 per ounce. So far this year, the precious metal has proven an impressive performer, up 26%. For comparison, the S&P 500 is up around 19% during that same period. 

Image: Stressed out investor attempts to hide gold in his yard under the cover of darkness (source: Grok / X)

So, what’s happening? Why have gold prices been rising?

Multiple reasons.

1. Inflation: While the Fed has aggressively tried to reign in inflation in recent years, it remains above target. In September, despite slowing for the sixth straight month, inflation in the US stood at 2.4%, or 20% higher than the Fed’s stated target rate of 2% annual inflation. Since gold is perceived as a hedge against accelerating prices, many investors have increased exposure to the precious metal.
2. Geopolitical Tension: Gold isn’t just considered a hedge against inflation; it’s regarded as a safe haven asset more broadly. This means it tends to retain or increase its value during periods of economic uncertainty or financial market turbulence. With the war in Eastern Europe showing no signs of letting up and tension in the Middle East escalating, some investors are moving into gold for protection.
3. US Presidential Election: With the presidential election for the most powerful country on the planet just weeks away - and no candidate clearly leading - some investors are understandably nervous. As a result, many are tucking into gold for peace of mind. 

Exposure via Gold Stocks

Sure, you can purchase bars of gold and store them in a vault or bury them in your yard, but it’s not the easiest way to obtain exposure. Instead, many investors opt for alternative routes, like stocks representing companies that derive income from the sector. Here are two names we like.

Kinross Gold

Image: Kinross Gold Corp return Oct. 7 to Oct. 22 (source: TradingView)

In his recent article, Steve Reitmeister highlighted that gold miners often see share prices rise 2-3x more than the metal. Why? Because their cost to extract the precious metal remains unchanged, even as gold’s price increases. As a result, each dollar gold appreciates delivers outsized profits to the miner.

Image: Kinross Gold Corp Zen Score (source: WallStreetZen)

Kinross Gold Corp (NYSE: KGC) remains an attractive name, appreciating over 13% since Steve published his piece.

The stock enjoys a healthy Zen Score, a grade given to a stock by WallStreetZen following a thorough fundamental due diligence review. With a score of 47, Kinross scores more than 80% higher than its industry peers. 

With gold continuing to rise, Kinross remains one of our favorite picks for obtaining exposure to this precious metal.

Idaho Strategic Resources Inc

Image: Idaho Strategic Resources Zen Score (source: WallStreetZen)

Our second pick is Idaho Strategic Resources Inc (NYSE: IDR), a mining company focused on activity in north Idaho and western Montana. Over the past year, the name has appreciated an impressive 235%.

Notably, with a score of 69, IDR’s Zen Score is more than 2.5 times the industry average. Again, this implies the company possesses solid fundamentals relative to its peers.

The Bottom Line

Gold prices are surging due to a combination of inflationary pressures, geopolitical uncertainty, and market jitters surrounding the upcoming U.S. presidential election. While buying physical gold is one option, investing in gold stocks could potentially offer outsized returns. Check out our Best Gold Stocks to Buy Now screener for more.

Want to get in touch? Email us at news@wallstreetzen.com.