Gold prices continue to rise as summer comes to a close. As I write this, the yellow metal is hitting new highs of over $2,500 an ounce. I’m looking to buy a cheap stock or two to take advantage of this price boom the next time I have money to invest.

There are several factors driving the gold rush, such as the expectation that inflation will rise as central banks cut interest rates. In particular, rate cuts by the Federal Reserve help the yellow metal by weakening the U.S. dollar, making it less expensive to buy dollar-denominated assets like gold.

Buying gold as a safe haven is also increasing following Ukraine’s invasion of Russia and renewed violence in Gaza and Israel. These recent events are fuelling fears of an escalation of conflicts in Europe and the Middle East respectively.

A top ETF

Investors can profit from the gold bull run in many ways. One option that I think should be seriously considered is to buy an exchange-traded fund (ETF) such as the iShares Gold Producers UCITS ETF (LSE:SPGP).

As the name suggests, this provides access to companies that derive the majority of their revenue from gold mining. And it has delivered an impressive return of 21.4% over the past year.

Owning a fund that focuses on gold mines has disadvantages compared to a fund that simply tracks the price of gold. Operational problems are common in the mining sector and can be enormously expensive when you consider lost revenue and high costs.

However, this iShares product significantly reduces this risk by investing in a wide range of companies. In fact, it now owns shares in 62 companies, including many heavyweights with great track records such as Newmont, Agnico Eagle And BarrickGold.

With an expense ratio of 0.55%, it also has one of the lowest fees of this type of ETF.

A great gold stock

For the reasons mentioned above, investing in a single mining stock can be riskier. However, there is also the potential to generate spectacular, industry-beating returns.

The story continues

This is something that buyers of Centamine (LSE:CEY) shares have experienced over the past year. FTSE250 The mining company’s share price has risen 54% over the past 12 months.

This is partly due to ongoing production at the flagship Sukari mine in Egypt, which is expected to increase production to 470,000 – 500,000 ounces in 2024.

Another reason is promising drilling results at its Doropo exploration project, a huge project in Ivory Coast. Centamin expects to receive a mining license here by the end of the year, although this is not guaranteed and problems on this front could hurt the share price.

Finally, the rise in Centamin stock reflects an explosion of interest from value seekers who want to get in on the gold rush.

As the following graphic shows, FTSE250 Pursue Despite it is trading at a large discount to the broader gold mining sector based on forward price-to-earnings (P/E) ratios. This could lay the foundation for even stronger future share price increases across the industry.

The post A cheap momentum stock and low-cost ETF I’d buy if gold prices skyrocket! appeared first on The Motley Fool UK.

Further reading

Royston Wild does not own any of the stocks mentioned. The Motley Fool UK has recommended Fresnillo Plc. The views expressed on companies mentioned in this article are those of the author and may therefore 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 broad range of insights makes us better investors.

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