Gold remained in focus for a major part during 2022 since the year was going through an environment of rising rates and a strong dollar, versus high inflation and increased macro uncertainty. resulting in wild swings in its price.
The gold price rose sharply in April 2023 and broke the US$2,000 per ounce level because of widespread uncertainty which was prevailing then. Although it has pulled back ever since, still it is believed that the yellow metal's fundamentals remain strong, and the lower price levels are offering an opportunity to buy.
The three best small cap stocks to buy in such an environment, when the dollar is weakening and US CPI data is easing.
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Theta Gold Mines Limited (ASX: TGM | OTC: TGMGF)
Theta Gold Mines Limited holds a range of prospective gold assets in a world-renowned South African gold mining region. These assets include several surface and near-surface high-grade gold projects which provide cost advantages relative to other gold producers in the region.
Theta Gold’s core project is located next to the historical gold mining town of Pilgrim’s Rest, in Mpumalanga Province, some 370km northeast of Johannesburg by road or 95km north of Nelspruit (Capital City of Mpumalanga Province). Theta Gold has access to over 43 historical mines and prospect areas that can be accessed and explored, with over 6.7Moz of historical production recorded.
Ora Banda Mining Limited (ASX: OBM)
Ora Banda Mining Limited is an Australia-based gold exploration and development company. The Company’s projects include Central Davyhurst, Riverina-Mulline, Siberia, Callion, Walhalla, Lady Ida, and Technical Data. It’s 100% owned Davyhurst Gold Project is located approximately 120 kilometers (km) northwest of Kalgoorlie, within the Tier 1 gold mining province of the Eastern Goldfields in Western Australia. The Company’s tenement package consists of approximately 95granted tenements covering an area of approximately 1,210 square kilometers (km2).
Gascoyne Resources Limited(ASX: GCY)
Gascoyne Resources Limited is an Australian gold company with a portfolio of 100%-owned assets in Western Australia. The flagship asset is the Dalgaranga Gold Project, situated approximately 65 km northwest of Mt Magnet in the Murchison Region. The project includes a fully developed gold mining operation and significant exploration potential for new discoveries. The Yalgoo Gold Project, centered around the Melville and Applecross Gold Deposits, is located about 20 km north of Yalgoo. Additionally, the company's Glenburgh-Mt Egerton advanced exploration/development project is situated approximately 300 km north of the Dalgaranga Gold Project, with Mt Egerton located around 180 km east of Glenburgh.
ETF’s
QAU: It basically tracks the price of gold bullion. Also offers a currency hedge
ETFS Physical gold: Investment here provides a return as per the movement of gold spot price.
Global gold miners ETF: It provides exposure to the largest gold mining companies by market capitalisation. Hedged into Australian dollars, it excludes companies listed in Australia.
VanEck Vectors gold miners: It offers exposure to large, mid and small cap, exchange listed companies, throughout the world and mainly involved in gold mining.
VanEck Gold Bullion ETF: It gives an investment in Australian sourced gold
Benefits of investing in gold shares
Investing in gold shares is considered a good strategy. Apart from diversification, it lends a stability to the portfolio. Favoured during economic downturns, it helps in mitigating financial risk. Most of the central banks buy gold as against hedging against inflation.
Trading in Gold
Gold is traded as a commodity throughout the day on markets all over the world. It is traded under code XAU.
The trading in gold is done in OTC (over the counter) continuously in gold markets and through futures contracts. The London bullion market is considered as the industry standard with the spot being set daily at 10.30am and 3.00pm GMT in US dollars.
Gold Stocks ASX: Top 5 Gold Mining Companies in 2023
Bellevue Gold Limited (ASX: BGL)
Bellevue Gold Limited is an Australia-based company, which is engaged in the exploration and evaluation of minerals in Western Australia. The Company’s projects include Bellevue Gold Project, Yandal Project, and Kathleen Valley Project.
The Company is advancing underground development and surface infrastructure at the project in tandem with resource extension and conversion drilling activities. The development activities for the Bellevue Gold Project, which began in July 2020, are progressing well. At the end of the September quarter, almost 69% of the project works were completed. 90% of the costs associated with pre-production have been contracted. Two underground diamond drilling rigs started drilling for grade control during the quarter, focusing on the Armand region. The first development ore intersecting in the 1251 Armand Ore Drive in July 2022 was a significant accomplishment for underground advance study.
Chalice Mining Ltd (ASX: CHN)
Chalice Mining Limited, is an Australia-based mining company. The Company is engaged in mineral exploration and Platinum Group Element-Nickel-Copper-Cobalt-Gold discovery. The Company's projects include Pyramid Hill Gold Project, which is located in Victoria, Australia; Julimar Nickel-Copper-PGE Project, which is located in Avon Region, Western Australia and Hawkstone Nickel-Copper-Cobalt Project, which is located in west Kimberley region of Western Australia
Northern Star Resources Limited(ASX: NST)
Northern Star Resources Limited is a gold mining company. Its principal activities include the development, mining and processing of gold deposits and sale of refined gold derived from the Yandal and Kalgoorlie operations in Western Australia and from the Pogo operations in Alaska, and exploration in relation to gold deposits in Western Australia, the Northern Territory and Alaska. Its segments include KCGM, Kalgoorlie Operations, Carosue Dam, Pogo, Jundee, Thunderbox and Exploration. Kalgoorlie Consolidated Gold Mines (KCGM) Operations is located adjacent to the City of Kalgoorlie-Boulder about 600 kilometers (km) east of Perth, Western Australia. The KCGM Operations include the Fimiston Open Pit (Super Pit), Mt Charlotte Underground Mine and the Fimiston and Gidji Processing Plants. The Kalgoorlie Operations include the Kanowna Belle mine, which site is situated in the Eastern Goldfields of Western Australia. It also owns interests in the tenements comprising the Millrose Project.
Emerald Resources NL (ASX: EMR)
Emerald is a developer and explorer of gold projects. In particular, Emerald has been focused on the development and commissioning of its most advanced project, the Okvau Gold Mine in Cambodia which saw first production in June 2021. Since commercial production commenced in September 2021, Emerald has now poured over 7,000kgs of gold doré from its operations. Emerald also holds a number of other projects in Cambodia which are made up of a combination of granted mining licences (100% owned by Emerald) and interests joint venture agreements. Together, Emerald’s interest in its Cambodian Projects covers a combined area of 1,639km². EMR’s wholly owned project such as Memot Gold Project in Cambodia, and Okvau Gold Project, Cambodia have seen encouraging drilling results from its ongoing infill resource drill program and exploration drilling. The company anticipates releasing the maiden resource results from its Memot Gold Project in the second half of 2023.
Evolution Mining Limited (ASX: EVN)
Evolution Mining Limited is a gold mining company. The Company operates gold-related mining projects in Australia and in Ontario, Canada. It owns and operates mines: Cowal in New South Wales; Mt Carlton, Mt Rawdon, and Ernest Henry, in Queensland; and Mungari in Western Australia. The Cowal gold operation is an open-pit gold operation located approximately 350 kilometers (km) west of Sydney. Its Mt Carlton operation is located approximately 150km south of Townsville, Queensland. The Mt. Rawdon open pit gold operation is located approximately 75km south-west of Bundaberg, Queensland. The Mungari gold operation is located approximately 600km east of Perth and 20km west of Kalgoorlie in Western Australia. The Ernest Henry copper-gold operation is operated by Glencore. It also operates Red Lake mining asset, which is an underground gold mine in western Ontario, Canada.
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Frequently Asked Questions (FAQ)
What is the difference between ounce and troy ounce?
Gold is measured in troy ounces which is 31.1035g as compared to regular ounce which is 28.3495g.
What influences the price of gold?
The main factors that influence the gold price are:
Purchases by the central banks for asset diversification and as a hedge against inflation.
Movement of USD. When the price of US Dollar is strong, it raises optimism amongst investors. A stronger dollar drives gold price down. Both are inversely proportion to each other.
At the times of economic uncertainty, people generally invest in gold.
Demand for gold jewellery. China, India and USA are the main buyers and strong demand for gold jewellery pushes its prices up.
Why should you invest in gold stocks?
Gold is a natural hedge against inflation. It also provides a diversification in the portfolio as it is less co related with other asset classes.
Is it a good option to buy gold in 2023?
Gold prices rise the most at uncertain times. Because of ample liquidity and its universal acceptance, it is considered a safe haven.
Central banks throughout the world buy gold, with particularly those in China, Turkey and India being more aggressive. The primary objective being to reduce reliance on USD, by increasing gold reserves thus diversifying their foreign reserves.
How much gold is held by central banks?
About one fifth of all the gold ever mined is held by the central banks globally.
What are the pros and cons of investing in gold stocks?
Not every time is a good time to buy gold stocks. Investing in gold stocks corresponds to buying gold. During 1990s to early 2000s, it faced a downtrend because of strong economic growth, thus losing its relevance as a safe haven and low returns making it a further unattractive investment. The other disadvantage of buying a gold stock could be stock specific. Poor exploration results, any mining accident or cost of operations going high adversely affect the stock.
The benefits of buying gold stocks is portfolio diversification. Gold prices are generally stable over a longer period of time while providing a hedge against inflation.
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