The last trading session saw gold prices initially try to rally after gapping lower. They filled the gap, and then broke down significantly to reach towards $1750 level. The $1750 is a strong support level, and experts expect to see a lot of support before a possible breakdown below.
This is exactly why investors should favor streaming and royalty companies in the meantime. Mining stocks like Royal Gold (NASDAQ:RGLD) or Franco-Nevada (NYSE:FNV) pay miners an upfront fee for the right to buy gold at reduced rates in the future. Miners use the cash, which they get access to without having to tap the capital markets, to fund investments or debt reduction efforts.
Reently, Royal Gold locked in a streaming deal that requires it to pay just 20% of the gold spot price up to certain production targets, and then a still-low 40% thereafter. The wide profit margin here is locked in because its costs go up and down with the price of gold. That's a big win as it provides material consistency to the business.
For investors gold stocks of streaming and royalty companies provide exposure to precious metals and robust profit margins. The low locked-in prices mean the mining companies can grow their businesses by investing in new streaming deals in good markets and in bad. It's a good balance of risk and reward. Especially if you want a diversified portfolio that spans across different mining stocks, regions and industries.
What makes Royal Gold one of the best gold stocks to invest in at the moment is its consistency in paying out dividends. What’s even more – the company has been increasing its dividend annually for 20 consecutive years. Royal Gold's ability to pay a consistently growing dividend is a testament to the strength of its business model. The strong end to fiscal 2021 with little debt and a collection of investments means there is little reason to think this will change. For investors looking to add some diversification to their portfolios with a gold play, this is a name you can buy and comfortably hold for a very long time.
If you are looking for a gold-linked investment, then you might want to consider Franco-Nevada as well. The diversified mining stock generates around 56% of revenue from gold, with silver and platinum-group metals (two other important precious metals) at 19%. "Other" metals add 11%, and energy 14%. It also has one of the largest investment portfolios in the streaming and royalty space. The company’s balanced portfolio of assets puts it in a good position to withstand market fluctuations. This mining stock offers a good way to get exposure to precious metals.