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5 Must-Buy Gold Stocks Ahead of Q2 Earnings on Rate Cut Hope

Nalak Das

Gold price, which remained range bound in the first five months of this year, skyrocketed in June driven by a dovish Fed and easy monetary stance by other major central banks, trade-related conflict across the world, and fears of a global economic slowdown. A recent comment by IMF on the U.S. dollar further fueled gold price.

Lower interest rates decreased the opportunity cost of holding nonyielding bullion, making gold cheaper for investors holding other currencies. Buying pressure on gold is likely to remain firm as investors will focus on precious metals as a store of wealth and hedge against market turmoil.

Fed Signals an Impending Rate Cut

On Jul 10, in a testimony to the House Financial Services Committee, Fed chair Jerome Powell said that the United States is suffering from a bout of uncertainty caused by trade tensions and weak global growth.

Powell reiterated Fed’s commitment to act as appropriate to sustain U.S. economic expansion, providing a clear message for a rate cut possibly in the upcoming FOMC meeting scheduled on Jul 30-31.

Meanwhile, on Jul 16, Powell again repeated his pledge to “act as appropriate” to keep the U.S. economic expansion going in a speech delivered in Paris. Moreover, Fed’s latest Beige Book, released on Jul 17, also reaffirmed that a rate cut is likely to protect the U.S. economy from a lingering trade dispute with China and might boost inflation, which is muted since the beginning of 2019.

U.S. Dollar Price Declines on IMF Comment

After Powell’s Congressional testimony, the ICE U.S. Dollar Index (DXY), which measures the greenback’s strength against a basket of six major currencies, fell 0.4%. Expectation of a low interest rate made U.S. dollar less attractive to investors.

Moreover, on Jul 17, the IMF remarked that the U.S. dollar is currently overvalued by 6% to 12%, based on near-term economic fundamentals. IMF’s comment is in line with President Trump, who is frequently blaming dollar strength for the currency’s loss of competitiveness in the international market. Consequently, on Jul 17, U.S. dollar price fell 0.2% to close at 97.07.

Treasury Yields Tumble as Trade Tensions Intensify

On Jul 16, President Trump said that a trade deal between the United States and China is a long way off. In addition, he also cast doubts on whether a deal will at all be possible or not. Trump once again threatened to impose a 25% tariff on another $325 billion of Chinese goods. Meanwhile, China has also toughened its stand on trade negotiations after adding commerce minister, Zhong Shan, known as a hard bargainer, to its negotiation team. 

Consequently, yield on 10-year Treasury Note declined 0.04% to 2.06% on Jul 17, its biggest single-day drop since May 31, as investors increasingly opted for safe haven government bonds instead of risky equities.

Gold Prices Surge

Fed’s rate cut hope, IMF’s comment on U.S. dollar and jump in government yields due to fears of global slowdown had a combined positive effect on gold price. Consequently, on Jul 17, spot gold price was up 0.3% to 1,4100.06 per ounce. Moreover, U.S. gold futures for August delivery jumped 0.9% to $1,423.60 per ounce, marking the highest finish for any active contract since May 14, 2013.

Our Top Picks

At this stage, it will be prudent to invest in gold stocks that are likely to beat earnings estimates in the second quarter. We have narrowed down our search to five gold stocks which surged in the past three months and still have upside left. Each of these stocks carries either a Zacks Rank #1 (Strong Buy) or 2 (Buy) and has a positive Earnings ESP. You can see the complete list of today’s Zacks #1 Rank stocks here.

Our research shows that for stocks with the combination of a Zacks Rank #3 or better and a positive Earnings ESP, the chance of an earnings beat is as high as 70%. These stocks are expected to climb after earnings release irrespective of already solid gains year to date.

Kinross Gold Corp. KGC engages in the acquisition, exploration, and development of gold properties in the United States, the Russian Federation, Brazil, Chile, Ghana, and Mauritania. It is also involved in the reclamation of gold mining properties and production and sale of silver. The stock carries a Zacks Rank #1.

Kinross Gold has an Earnings ESP of +36.36% for the current quarter. The company has an expected earnings growth rate of 80% for the current year. The Zacks Consensus Estimate for the current year improved 38.5% over the last 30 days.

The company delivered positive earnings surprise in three out of the last four quarters with an average beat of 33.3%. The stock has jumped 28.5% in the past three months. Kinross Gold is expected to release earnings results on Jul 31, after the closing bell.



Franco-Nevada Corp. FNV is a gold-focused royalty and stream company with additional interests in platinum group metals and other resource assets. It also holds interests in silver and platinum group metals; and oil, gas, and natural gas liquids. The stock carries a Zacks Rank #1.

Franco-Nevada has an Earnings ESP of +2.65% for the current quarter. The company has an expected earnings growth rate of 16.2% for the current year. The Zacks Consensus Estimate for the current year improved 3.8% over the last 30 days.

The company delivered positive earnings surprise in two out of the last four quarters with an average beat of 6.4%. The stock has jumped 23.1% in the past three months. Franco-Nevada is expected to release earnings results on Aug 14.



Barrick Gold Corp. GOLD is a leading international gold producer with low-cost mines in North and South America. The company predominantly explores gold, copper, and silver deposits.The stock carries a Zacks Rank #2.

Barrick Gold has an Earnings ESP of +13.51% for the current quarter. The company has an expected earnings growth rate of 17.1% for the current year. The Zacks Consensus Estimate for the current year improved 5.1% over the last 30 days.

The company delivered positive earnings surprise in three out of the last four quarters with an average beat of 0.4%. The stock has jumped 26.4% in the past three months. Barrick Gold is expected to release earnings results on Aug 12, before the opening bell.



New Gold Inc. NGD is an intermediate gold mining company, engaged in the development and operation of mineral properties. It primarily explores gold, silver and copper deposits.The stock carries a Zacks Rank #2.

New Gold has an Earnings ESP of +33.33% for the current quarter. The Zacks Consensus Estimate for the current year improved 5.1% over the last 30 days. The company delivered positive earnings surprise in three out of the last four quarters with an average beat of 141.7%. The stock has jumped 75.1% in the past three months. New Gold is expected to release earnings results on Jul 24.



Newmont Goldcorp Corp. NEM is a gold company and a producer of copper, silver, zinc and lead. The company's portfolio of assets are located principally in North America, South America, Australia and Africa.The stock carries a Zacks Rank #2.

Newmont Goldcorp has an Earnings ESP of +0.84% for the current quarter. The company has an expected earnings growth rate of 3.7% for the current year. The Zacks Consensus Estimate for the current year improved 2.9% over the last 30 days.

The company delivered positive earnings surprise in the last four quarters at an average beat of 39.8%. The stock has jumped 18.2% in the past three months. Barrick Gold is expected to release earnings results on Jul 25, before the opening bell.



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Kinross Gold Corporation (KGC) : Free Stock Analysis Report
 
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New Gold Inc. (NGD) : Free Stock Analysis Report
 
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