The prospects for the gold price seem to be relatively robust. Higher inflation prospects in the US could mean that demand for the precious metal increases, since it has historically been seen as a store of wealth by investors. And with there being the potential for inflation to be exported across the globe to bring to an end the deflationary period of the last decade, gold could be a shrewd investment.
One means of gaining exposure to the gold price is via miners. Their profitability is clearly impacted by the price of gold. With that in mind, here are two gold miners that could be worth a closer look.
Releasing an operational update on Wednesday was South American-focused gold and silver miner Patagonia Gold(LSE: PDG). The company reported that its total production for 2017 was 26,005 gold equivalent ounces. This was marginally higher than 2016's figure of 25,800 gold equivalent ounces.
Monthly production continues to ramp up at Cap Oeste, with it scheduled to exceed 4,200 gold equivalent ounces in February. Cash costs remain relatively competitive, with them standing at $711 per gold equivalent ounce. With the company's production guidance for 2018 being 59,000 gold equivalent ounces, it is anticipating a significant increase in production. This has the potential to strengthen its financial position and could help it to deliver improved share price performance.
Certainly, Patagonia Gold is a small and risky miner. If the price of gold moves downwards then it could lead to challenges for the company and for its investors. However, with its operational performance continuing to improve according to Wednesday's update, it could be worthy of a closer look for less risk-averse investors.
Total return prospects
Also worth a closer look within the gold mining sector is Polymetal(LSE: POLY). The Russia-focused company has experienced a difficult year, with its share price falling by 20% as investor sentiment towards such miners has waned.
Looking ahead, the business is expected to report a rise in its bottom line of 16% in the current year, followed by further growth of 20% next year. This suggests that with gold continuing to post gains in recent months, the prospects for the industry remain relatively positive. And with investor sentiment being somewhat subdued, it means that the stock has a price-to-earnings growth (PEG) ratio of just 0.4 at the present time. This suggests that it offers a wide margin of safety and could deliver capital growth over the medium term.
In addition, Polymetal also offers a relatively high income return. The stock has a dividend yield of 5.3% for the current year, which is due to move up to 6.3% in 2019. Despite such a high dividend yield, its payouts are expected to be covered 1.9 times by profit. This suggests that they are highly sustainable and could mean that further dividend growth is ahead over the coming years.
Peter Stephens has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.