Should you invest in gold stocks with rising inflation?

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 Should you invest in gold stocks with rising inflation?
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Highlights

  • The year 2021 has been one of the most disappointing years for gold investors as it gave marginally negative real returns.
  • Investing in gold is an important part of an investment portfolio.
  • Gold shares are the stocks issued by the companies engaged in mining and exploration of gold.

The year 2021 has been one of the most disappointing years for gold investors as it gave marginally negative real returns. Gold is usually considered to be a hedge against rising inflation, but the year 2021 was different. 

Investing in gold is an important part of an investment portfolio as history has shown that during difficult economic conditions and higher inflation the value of gold increases because it is not correlated to the performance of other investments.

The inflation rate of the UK surged unexpectedly to 5.4% in December up from November’s 5.1%, so investors may consider buying gold stocks instead of physical gold to diversify their portfolio and enhance their return when physical gold can’t.

Gold stocks are the shares issued by the companies engaged in mining and exploration of gold. You may also invest in financial instruments that base their performance on the future value and changes in gold prices and in investment funds that themselves invest in gold.

Buying gold stock rather than physical yellow metal has various advantages

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There are many benefits of buying gold stocks the major one is gold stocks generate higher total returns than physical gold as gold mining business can expand their production and reduce costs. However, not all gold stocks may outperform gold prices. Before investing in any stocks, it's necessary to conduct your own research. Even though various major gold stocks are giving negative returns over the past year they may still prove to be a good investment option in long term.

Also Read: 5 gold penny stocks worth buying in 2022

Let us look at the top five gold stocks that you may consider investing in with inflation.

  1. Antofagasta Plc (LON: ANTO)

The current market cap of Antofagasta Plc stands at £13,373.15 million as of 25 January 2022. It has given a negative return of 7.28% to its shareholders in the last one year and its YTD return stood at 4.22%. Antofagasta Plc’s shares were trading at GBX 1,387.50, up by 2.29%, around 9:55 am (GMT) on 25 January 2022.

  1. ARC Minerals Limited (LON: ARCM)

The current market cap of ARC Minerals Limited stands at £32.21 million as of 25 January 2022. It has given a negative return of 55.80% to its shareholders in the last one year and its YTD return stood at 18.24%. ARC Minerals Limited’s shares were trading at GBX 2.75, down by 1.79%, around 9:35 am (GMT) on 25 January 2022.

  1. Centamin Plc (LON: CEY)

The current market cap of Centamin Plc stands at £1,056.76 million as of 25 January 2022. It has given a negative return of 21.14% to its shareholders in the last one year and its YTD return stood at 6.10%. Centamin Plc’s shares were trading at GBX 94.24, up by 3.13%, around 9:55 am (GMT) on 25 January 2022.

Also Read: Why investing in gold this year can be profitable?

  1. Caledonia Mining Corporation Plc (LON: CMCL)

The current market cap of Caledonia Mining Corporation Plc stands at £118.06 million as of 25 January 2022. It has given a negative return of 20.70% to its shareholders in the last one year and its YTD return stood at 0.33%. Caledonia Mining Corporation Plc’s shares were trading at GBX 920, around 9:35 am (GMT) on 25 January 2022.

  1. Pan African Resources Plc (LON: PAF)

The current market cap of Pan African Resources Plc stands at £364.07 million as of 25 January 2022. It has given a negative return of 19.04% to its shareholders in the last one year and its YTD return stood at 14.90%. Pan African Resources Plc’s shares were trading at GBX 19.16, up by 1.48%, around 9:55 am (GMT) on 25 January 2022.

Also Read: Top 7 gold stocks of 2021

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