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Three Cheap Gold Stocks That’s Beating The Market

Although this year has presented investors with tremendous challenges, spot gold remains a buffer and potential hedge against inflation. Yet, for many investors, the volatile market, and macroeconomic headwinds have seen many of them fleeing the gold market. Nonetheless, gold stocks continue to be a strong contender, although they provide slightly less return on capital investment.



gold stocks

Gold prices have managed to contain their steady performance for much of the year, despite central banks across the world raising interest rates against the backdrop of sticky inflation. Read more to find out why gold stocks are good investments.

The precious metal kicked off November on a cautious note, with investors and traders keeping their fingers on the pulse following the Federal Reserve’s upcoming decision to potentially continue their monetary tightening on the back of steady wage growth and wider macroeconomic turbulence in recent weeks.

Prices of spot gold have managed to contain their performance above the psychological resistance of $2,000 according to analysts. However, the possibility of further interest rate hikes sent gold prices stumbling, and broader market speculation has seen the yellow metal trade in a range between $1,960 and $2,010 over the last few weeks.

More than this, outflows of gold, based on demand, have remained within their historic pace, however, the most recent third-quarter delivery is below the Q3 2022 record, according to data by the World Gold Council.

For Q3 2023, gold demand was 8% above its five-year average, excluding over-the-counter (OTC) outflows. On the other hand, both OTC outflows and gold stocks have managed to climb 6% year-over-year, while central bank buying of 337 tonnes was the strongest quarter on record.

The spot gold market has somewhat softened, as central banks, excluding the U.S. Federal Reserve, hold off on any more interest rate hikes, as inflation begins to cool, and wider economic activity begins to slow down.

Cheap gold stocks that are beating the market

Overall, investors and traders are seeking potential inflation-busting investment vehicles that could help create portfolio buoyancy, as recession fears and market volatility remain at an all-time high.

However, soaring gold prices and the stronger dollar have sent many novice and seasoned investors fleeing to buy up cheap gold stocks that have fared well this year, despite wider market and economic volatility.

Kinross Gold Corporation

The Canadian gold and silver mining company, Kinross Gold (NYSE: KGC) currently operates six active mines in Brazil, Canada, Chile, Mauritania, and the United States. For its 2023 global guidance, the company has set out to increase production by +/-5% this year and maintain production cost of sales at $970 per ounce (oz).

The higher interest rate environment, and rising costs, including labor and production, have meant that many mining companies, similar to Kinross Gold, had to increase their production cost of sales per ounce, with some companies now setting prices above $1,000 per ounce.

For this second quarter, Kinross earnings provided promising upside to investors, with total quarterly production climbing 22% year-over-year to roughly 555,036 gold equivalent ounces.

Second-quarter net earnings were reported at $151 million, or $0.12 per share, while adjusted net earnings were $167.6 million, or $0.14 per share. The company further declared a quarterly dividend of $0.03 per share, which further highlighted Kinross’s long-term outlook to raise guidance and maintain sustainable operational expenditure.

On the stock market, share performance has soared, with KGC climbing more than 22% to date. After falling to a yearly low of $3.42 per share in May, stocks managed to regain their footing, and have since gained 52.34%.

Seeing as the company is on track to meet its 2023 guidance, and expand with new operations in the coming years, KGC is a healthy, yet less volatile long-term gold investment for investors seeking portfolio diversification and less risk exposure to the gold market.

Lundin Gold Inc

The second company is Canadian-based Lundin Gold (OTCMKTS: LUGDF) which has operations spread across much of continental South America. Currently, the company owns 28 metallic mineral concessions and three construction material concessions. These operations cover more than 64,400 hectares in southeast Ecuador.

Lundin Gold’s biggest, and perhaps most active mine, based on second quarterly financial results is the Fruta del Norte (FDN) which covers an area of 5,566 hectares and is located 140 kilometers from the City of Loja, in northeast Ecuador.

The company claims that its FDN mine currently extracts some of the highest-graded quality gold in the world. More on this, based on their Q2 2023 financial reportings, Lundin mined more than 404,408 tonnes of gold, compared to the 369,430 tonnes mined in the same quarter last year.

Overall, the company’s gold production was higher than expected due to an increased mill output, and higher head grade quality. These offsets, combined with better quality gold extraction helped minimize necessary recoveries, which helped to reflect on their quarterly earnings.

For the quarter, revenues came in at $243.93 million, which represents a nearly 35% year-over-year improvement. Furthermore, the company generated the highest quarterly free cash flow on record during the three months, with $132 million in free cash flow, or $0.56 per share.

On the stock market, improved production output, coupled with increased material quality, and overall decreased recoveries, stocks tumbled slightly, retracting roughly 2.39% during the second quarter. However, after Q2 2023 earnings, stocks jumped nearly 7% and helped further add to the average 20.90% year-to-date performance growth.

Stocks finished October on the lower end, with LUGDF sliding nearly 7% during the final week of October, and is set to start the month of November trading at a day range of $11.82 – $12.50 per share.

Share performance remains strong, and the company is on track to meet its fiscal 2023 guidance. This could help present LUDGF with a blowout potential, however, the spot price of gold and the interest rate environment could be potential headwinds for stock performance in the coming months.

Eldorado Gold Corp

Eldorado Gold (NYSE: EGO) is a mining and exploration company headquartered in Canada and currently operates four mines in Canada, Greece, and Türkiye. Last year, the company produced roughly 454,000 ounces of gold, with roughly $788 per ounce in cash operating costs for the fiscal year.

The company is one of the only ones on our list that has already released third-quarter financial earnings, and based on recent performance, the company currently presents a significant upside potential for investors who are seeking low-risk gold stock investments.

For the third quarter, revenues of $245.3 million represented a 13% increase compared to Q3 2022, mainly because the company experienced overall improved sales, and higher realized gold prices which had played into their favor.

More than this, net generated cash from operating activities grew from $52.7 million in Q3 2022 to more than $108.1 million in the most recent quarter. Despite broader macroeconomic trends impacting mining companies, and many having to raise their prices, to stabilize their bottom line, while also raising profits, Eldorado had managed to decrease their production costs, which ultimately improved their revenues for the third quarter.

Additionally, improvements in production initiatives in both its Kisladag and Olympias mines helped improve gold production for the quarter. In total, the company reported more than 121,030 ounces extracted, which represented a 2% improvement compared to the 118,791 ounces extracted during the same period last year.

Given slight volatility within the company, as a result of decreased extraction in some regions due to wildfires and maintenance operations, stocks have been zig-zagging across the market, but have managed to improve by 27.33% to date.

Halfway through the third quarter, stocks plummeted by more than 16% on the back of decreased operations, higher interest rates, and inflationary pressure causing macroeconomic headwinds.

However, since the start of October, EGO has soared roughly 27.64% and has managed to soften investor sentiment considering the long-term outlook for the company. Based on current reports, Eldorado is updating its production, cost, and capital expenditure outlook for the rest of the year, as it aims to generate improved growth capital, and further boost production output in the final stretch of the year to make up for lost production periods experienced earlier in the year.

Final Take

Although this year has presented investors with tremendous challenges, spot gold remains a buffer and potential hedge against inflation. Yet, for many investors, the volatile market, and macroeconomic headwinds have seen many of them fleeing the gold market in search of more diversified options in the equities market.

Nonetheless, gold stocks continue to be a strong contender, although they provide slightly less return on capital investment. This guidance would place some gold stock options in the long-term basket for investors who seek increased portfolio diversification and less risk exposure in the short run. 


(Featured image by Michael Steinberg via Pexels)

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Jacob Wolinsky is the founder and CEO of ValueWalk. What started as a hobby ten years ago has turned into an acclaimed financial media empire with over five million views a month. Before doing ValueWalk full time, Jacob worked as a private equity analyst, small-cap stock analyst, and in hedge fund business development. Jacob lives with his wife and four kids in Passaic, New Jersey.