We recently compiled a list of the 10 Best Gold Stocks to Buy According to Reddit and Robinhood. In this article, we are going to take a look at where Rio Tinto Group (NYSE:RIO) stands against the other gold stocks.
Regarded as a safe investment option, hedging investors against inflation, Gold has been a highly demanded precious metal historically. As such, in 2023, the precious metal’s demand soared by 3% year-over-year (YoY), hitting the 4,899 tons mark. This is on the back of growing demand from emerging markets like India and China, who were responsible for 75% of this demand. This ever-increasing trajectory of demand is expected to continue in the current year as well which is going to be discussed below.
Amidst the inflationary state in the U.S. for the past while, and the resulting uncertainty in the market, gold has seen its prices rise in 2023, reaching its all-time high, on the back of 13% increase. The increase in demand mainly came from central banks, the industrial sector, and investors. A trend was also observed in 2023, wherein the global sovereign wealth funds were reported to be increasing their holdings in the precious metal.
The price of gold is a complex mechanism, as it is impacted by several factors like demand, market stability, and interest rates, to name a few. Nevertheless, several analysts are looking to a positive future for gold, as they expect the prices to be sitting somewhere between $2,421.00 and $2,651.00 (per ounce rate) by the current year end, as compared to its current price of $2374.31, as of writing this article.
This trend is also shaping up on the back of the Fed’s plans for a rate cut later in the year, as the gold prices usually have an inverse relationship with the market interest rate. As such, the rate cut that is expected to occur somewhere in September is also helping analysts forecast the precious metal’s price increase in 2024.
Following is what was spoken about the gold market by an analyst at PrimeXBT, Kathryn Davies, in June 2024:
“Gold has fallen from its all-time high of $2,222 after the SNB cut rates, boosting the USD. However, the gold price remains supported by the prospect of Federal Reserve rate cuts and a lower interest rate environment globally. Elevated geopolitical tensions and central bank purchases also keep demand high, and the price supported. As a result, Gold could see more all-time highs as we progress through 2024, rising to $2400 by the year’s end.”
In terms of the global market, China is a crucial player in the gold market – China is not only the largest producer of gold (producing 12% of gold in 2023), but also the largest consumer of gold, with its central bank, on its own, buying 225 tons of gold in 2023, up from 62 tons in the previous year. Analysts have attributed China’s massive buying of gold to the freezing of Russian assets by the U.S. and its allies, which China is attempting to hedge itself from by buying Gold – pushing up the gold prices by doing so.
Australia and Russia closely follow China in the gold production game; in 2023, China, Russia, and Australia recorded a gold production volume of 375 tons, 325 tons, and 314 tons, respectively. The U.S. was placed 5th on the same list created by Insider Monkey, with a production volume of 173 tons! To date, 209,000 tons of gold have been mined across the globe, equaling a value of massive $12 trillion!
Having discussed the expected future of gold prices, it’s time we explore the world of gold stocks, which directly correlate with the gold price trajectory. Thus, let’s now jump to our list of 10 Best Gold Stocks to Buy According to Reddit and Robinhood.
Methodology
Extensive research across the Reddit discussion forums, along with the Robinhood Index, helped us in curating our preliminary list of all the stocks discussed across the two sources. Based on the analysts’ sentiment regarding each stock across both sources, we assigned the Reddit score and Robinhood score to the stocks and ranked them based on the average score, which we will refer to as the Overall score. Lower the score, better the ranking of stock. For stocks with an equal Overall score, we used Reddit score as the tiebreaker.
The overall score was derived from the number of upticks on Reddit forums against the respective stocks, and the number of analysts assigning buy ratings to the respective stocks on Robinhood. We also peeked into Insider Monkey’s database that tracks the activity of 920 hedge funds, wherein we collected information about the hedge fund investors’ holders of all these stocks to reaffirm the respective stocks’ sentiment across the two sources.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
Aerial view of an open pit mine, with workers extracting minerals.
Rio Tinto Group (NYSE:RIO)
Overall Score: 8
Reddit Score: 10
Robinhood Score: 6
Number of Hedge Fund Holders: 37
With Oyu Tolgoi and Kennecott projects to their name, Rio Tinto Group (NYSE:RIO) operates gold mines and extracts gold from them. These mines hold deposits of copper as well.
Rio Tinto Group (NYSE:RIO) is the 2nd biggest mining company in the world by revenue, after boasting a revenue of a whopping $54.04 billion in 2023. The positive aspect of investing in this stock includes greater exposure to several markets, including but not limited to, the lithium market and iron ore market, in addition to gold; it is one of the best lithium and battery stocks to buy now as well.
The stock has seen rising interest from hedge fund investors, as three more investors have grabbed a stake in the stock since the last quarter of 2023, taking the total tally to 37, and taking the total stake to a whopping $1.4 billion! Fisher Asset Management and Citadel Investment Group hold the biggest chunk of the stock’s ownership amongst these investors with investments of $1 billion and $136 million, respectively. Moreover, 70% of the analysts at Robinhood are recommending that investors buy the stock; this might be on the back of the stock’s massive upside of 24.31%!
However, this outlook of the stock is against the recent stock price performance, as it has fallen 10.4% on year-to-date (YTD) basis. But that’s quite common with the mineral stocks, which are quite cyclical, and as such, the lower aluminum and other mineral prices resulted in a reduction in its underlying earnings for the year 2023 from $13.4 billion in the previous year to $11.8 billion (a 11.94% decrease), affecting the investors’ sentiments regarding the stock. The aluminum prices fell to $2,100 level during 2023, down from its $2,662 level at the start of the year, primarily due to China’s (biggest aluminum producer) timid recovery from COVID-19.
Moreover, the company expects its per unit costs of Pilbara iron ore operation to increase in 2024 to $21.75-23.5 from $21.5 in 2023 due to larger workforce requirements and post-inflation lags. For the 2nd quarter of 2024, aluminum, copper, and gold output saw an uptick from the output level in Q2 2023, increasing 1%, 18%, and 9%, respectively, due to improvement in the operations. However, the iron ore production in Pilbara was down 2% from the same period in 2023, due to train collision resulting in a loss of six days rail capacity.
However, the company increased its production from the Pilbara operation by five million tons in 2023, and expects a further five million uptick in production in 2024, as they stated in their guidance for the year. Furthermore, the company has entered into an agreement with Ngarluma Aboriginal Corporation (NAC) in July 2024 to construct an 80 MW solar farm, with the purpose of supplying renewable energy to its Pilbara operations. With the project potentially replacing up to 11% of natural gas currently consumed in the operations, we can expect operational costs to go down post the installation.
Thus, having said that, with the stock giving out good value trading at just 10.95 times its earning and giving out a yield of 6.52%, the stock seems to be quite a good bet, making it to our list of best gold stocks to buy according to Reddit and Robinhood.
Overall RIO ranks 9th on our list of the best gold stocks to buy according to Reddit and Robinhood. You can visit 10 Best Gold Stocks to Buy According to Reddit and Robinhood to see the other gold stocks that are on hedge funds’ radar. While we acknowledge the potential of RIO as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than RIO but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.