Inflation expectations are rising, as the government continues to pump in more and more stimulus into the economy. The U.S. dollar remains weak in this environment, and bond yields are still, historically speaking, very low. Real interest rates remain negative, paving the way for commodities to take off.
This environment should be bullish for gold. And it has been. However, many gold investors may be discouraged by the relative underperformance of precious metals in this environment. Indeed, the performance of gold of late has been disappointing, to say the least.
That said, I believe that we’re still in the early innings of a bull market in precious metals. Indeed, the market will soon take note of the catalysts that are in favour of gold today. Accordingly, now would be the perfect time for investors to consider these two top stocks in the gold mining space.
Kirkland Lake Gold
When it comes to fundamentals, it’s hard to find another gold miner on the TSX that can compete with Kirkland Lake Gold (TSX:KL)(NYSE:KL). The stock trades around the $48 mark today and has a valuation multiple of approximately 13 times earnings. Indeed, this gold miner is a bargain right now. Furthermore, this gold miner’s balance sheet is top notch.
The Toronto-based company has practically no debt and is generating a tonne of cash flow right now. This has enabled Kirkland Lake to increase its dividend substantially. Taking into account Kirkland Lake’s excellent margins and high-quality mines, it’s hard to believe that this stock is so undervalued right now.
Indeed, its best-in-class mining operations in Australia and Canada provide extremely stable and growing cash flows. These cash flows position Kirkland Lake as an excellent option for conservative investors who are seeking defensiveness right now.
Barrick Gold (TSX:ABX)(NYSE:GOLD) has been on my radar for quite some time. I have no doubt that this remains a great buy for investors who are in search of a long-term holding. This gold miner has been able to build a wide moat with high-quality reserves and mines. This is one of the primary reasons why the Oracle of Omaha, Warren Buffett, previously took a position in this stock.
When it comes to this sector, there aren’t many companies that have such diverse operations. Indeed, Barrick conducts operations in over 10 countries. Furthermore, most of its operating metrics are in a class above its peers. Yes, gold has underperformed over the past year. But for those bullish on gold, Barrick is a top-notch option to consider today.
Indeed, Barrick Gold’s reserves are what make this stock a hot commodity for me. The sheer number of ounces of gold Barrick has in the ground is enticing for those bullish on shiny metals today.
Like these top picks? Here are a few more to choose from:
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Fool contributor Chris MacDonald has no position in any of the stocks mentioned.
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