Gold stocks tend to fly under the radar in a market where investors chase cryptocurrencies, growth stocks, and the "next big thing." However, the U.S. Central Bank has continued to increase the money supply in the economy, which has resulted in increased inflation.

Gold is a timeless store of value, and investors could consider these three gold stocks as tools to defend against the effects of inflation.

Why buy gold stocks?

Gold has been a store of value for centuries, which means it holds purchasing power as a substitute for paper currency. We pay for goods and services using paper money, but the purchasing power of that money changes over time because the amount of paper currency circulating through the economy fluctuates.

Woman wearing gold jewelry.

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Central banks manage how much paper money flows through the economy at any given time, and has significantly increased the quantity of paper money over the past two years in response to the pandemic. When more paper currency enters the economy, it can decrease the purchasing power of each dollar. In other words, the price of goods and services increases, which is called inflation.

However, gold is a finite resource; there is only so much gold in the world. As a result, the value of gold, which is reflected in gold prices, tends to increase when inflation rises. Companies that mine for and sell gold are in turn more profitable when gold prices are high.

Gold hit an all-time high price of $2,063 per troy ounce last summer, and it remains near the high end of its historical range. In this sort of monetary environment, gold stocks can be an important part of a resilient portfolio.

1. Newmont

Newmont (NEM 1.82%) explores and mines for gold, silver, copper, and zinc from its reserves located around the world; the vast majority of its business is centered around gold. It delivered 5.9 million ounces of gold in 2020, and brought in nearly $11.5 billion in revenue.

The company has its reserves located in North and South America, Australia, and parts of Africa, and it estimates that its reserves total 94 million ounces. Management is guiding for a long-term average of 8 million ounces to be delivered each year over the next decade, so its gold business should remain strong moving forward.

The strength of gold prices has been great for Newmont's business, and the company generated $3.7 billion in free cash flow in 2020. It's expected to continue enjoying high gold prices, too -- and as a result, analysts estimate Newmont to bring in $13 billion in revenue for 2021, a 13% increase over 2020.

2. Barrick Gold

Barrick Gold (GOLD 0.47%) is a Canadian mining company that mines gold and copper. It has reserves located worldwide, including in North and South America, Africa, and the Middle East. Its business is centered around gold, and it delivered 4.8 million ounces in 2020, while generating $12.6 billion in total revenue.

Management is forecasting stable gold deliveries moving forward that should average 4.5 million ounces per year. The business has just over $5 billion in cash and equivalents on its balance sheet, so it has ample cash to operate through any fluctuations in gold prices.

Barrick is expected to generate roughly $12.25 billion in revenue in 2021, so the company isn't likely to grow very much given its delivery forecasts moving forward. However, it generated a record $3.4 billion in free cash flow in 2020, so the business is poised to continue building up cash that it can use to invest in growth opportunities.

3. Franco-Nevada

Franco-Nevada (FNV 0.64%) is a Canada-based gold-focused company that owns royalties and streams on gold mines worldwide. It doesn't actually explore and mine for gold; rather, it owns stakes in gold mines, receiving a royalty on the gold that comes from them.

Its royalty streams come primarily from mines in the United States, Canada, Mexico, and South America. It received royalties on the equivalent of 521,564 ounces in 2020, and generated just over $1 billion in revenue.

The company doesn't have to deal with the expensive mining process, so its business is very profitable, earning an adjusted EBITDA of $839.6 million in 2020. Management uses the company's profits to acquire more royalty streams and pay a dividend to its shareholders.

All that glitters

Gold can be a great way to defend a portfolio against the impacts of inflation. These companies offer investors a variety of ways to get exposure without owning gold itself. However, the gold industry is sensitive to the commodity's price, so investors should always remember that and diversify accordingly.