With the U.S. Federal Reserve signaling that it may soon tighten monetary policy, some investors are growing concerned about investing in the gold and precious metals space.
However, gold stocks may still have more room to run in the months ahead. That’s because even though tighter monetary policy typically puts pressure on safe-haven assets, shares of gold-related companies have continued to climb since hitting a low in September.
This could indicate that we may see a rally unfold over the long term, as we could be entering yet another upcycle for some gold and precious metal companies.
And this could ultimately benefit some of the ‘less risky’ firms operating in the space, including Royal Gold (RGLD).
Royal Gold is a precious-metal royalty and streaming company. This means RGLD funds mining and exploration projects. And, in return, businesses pay royalties based on a certain amount of mined metals.
This enables the company to benefit from the exposure to the mining and exploration market without having to physically do it itself. As a result, RGLD doesn’t deal with the traditional risks of operating in the sector, including the costs associated with acquiring precious metals.
This strategy has paid off for the company in recent months. In early November, RGLD reported third-quarter earnings per share of $1.07 compared with the estimated $0.90. The company’s revenue was $174.4 million, greater than the anticipated $165.4 million.
And given its strong performance, this trend should continue, as the company’s balance sheet and upcoming projects position it well for future growth.
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