Successful commodity investing is a tough game.

Whether it’s oil and gas, gold, or almonds; all commodities at some point or another become subject to price rises as demand for the commodity climbs, before a big spike in supply as producers try to cash in, and then a crash in price as supply floods the market.

To win as an investor you need to get in before the demand rises and get out before the price plummets.

I closely limit my exposure to commodities, but avoid gold and gold miners like Newcrest Mining Limited (ASX: NCM) and EVOLUTION FPO (ASX: EVN) in general because gold has limited industrial use and in my view the price often fluctuates based on investor emotions, a driver no one can easily predict or measure.

Having said all that, one company I do like is Northern Star Resources Ltd (ASX: NST). If I had any faith in gold I would probably buy shares in it. That’s because despite being at the mercy of gold prices, Northern Star Resources is a remarkably well positioned business.

Going for gold

For instance even with a market capitalisation of around $1.7 billion the company has no bank debt. By comparison Newcrest Mining had around $3 billion in debt at 30 June 2015, and almost 30% gearing. Debt is not inherently bad, but can become a risk factor when commodity prices fall.

Northern Star has also been building a war chest of cash. For the most recent December quarter, the company added $30 million in cash assets after paying a dividend and investing in growth. The company declared a 32% return on equity in its 2015 Annual Report and was sitting on $226 million in cash assets at 31 December 2015, all strong positives against volatile commodity prices.

And still growing

Northern Star’s rapid rise in production as it acquired assets from distressed sellers may simply have been good timing, but looking ahead the company is aiming to continue developing the assets and grow gold production significantly over the next two years.

From producing 215,419 ounces of gold in the 2014 financial year (FY14), Northern Star is targeting production of up to 570,000 ounces in FY16, and 700,000 ounces in FY18. This is described as “organic” growth from investment in exploration and development of existing assets.

Exploration and development of course come with additional risks, like failure or the danger of gold price changes and currency fluctuations. But if the prudent management of Northern Star continues into the years ahead the company will be better placed than many to ride out volatility.

Here's where I'm investing instead; Our Top Dividend Stock for 2016

Our resident dividend expert names his Top Dividend Share for 2016. Not only are the shares dirt cheap, the company is trading on a 5.6% fully franked dividend yield. Simply click here to gain access to this comprehensive FREE investment report, including the name of this fast growing ASX dividend share. No credit card required!

HOT OFF THE PRESSES: Motley Fool’s #1 Dividend Pick for 2017!

With its shares up 155% in just the last five years, this ‘under the radar’ consumer favourite is both a hot growth stock AND our expert’s #1 dividend pick for 2017. Now we’re pulling back the curtain for you... And all you have to do to discover the name, code and a full analysis is enter your email below!

Simply enter your email now to receive your copy of our brand-new FREE report, “The Motley Fool’s Top Dividend Stock for 2017.”

By clicking this button, you agree to our Terms of Service and Privacy Policy. We will use your email address only to keep you informed about updates to our website and about other products and services we think might interest you. You can unsubscribe from Take Stock at anytime. Please refer to our https://www.fool.com.au/financial-services-guide">Financial Services Guide (FSG) for more information.

Motley Fool contributor Regan Pearson has no position in any stocks mentioned. Unless otherwise noted, the author does not have a position in any stocks mentioned by the author in the comments below. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.