Comex gold futures for June delivery climbed 1.5% to close at $1,768.90 an ounce on Apr 14, after hitting an intraday peak of $1,788.80, the highest level since October 2012. Spot gold closed at $1,726.40 after attaining a high of $1,749.80. Apprehensions regarding global economic growth amid the coronavirus-induced crisis coupled with stimulus measures from central banks and governments to counter the same are fueling gold prices.
The U.S Federal Reserve has announced plans of a stimulus package worth $2.3 trillion as economic aid to businesses and state and local governments as the country continues to battle the coronavirus pandemic. Per the World Health Organization’s situation report as of Apr 14, 2020, the United States is currently the worst affected by the virus, with 553,822 cases, followed by Spain with 169,496 and Italy with 159,516. So far 1.8 million people have been infected by the virus globally with the death toll at 117,021.
Around 6.6 million Americans have filed for unemployment benefits last week taking the three-week total to an unprecedented 16 million amid the stay at home orders issued to curb the spread of the virus. These figures show that the virus has cast a pall over the U.S economy.
Consequently, the whole world is currently on edge with the coronavirus-induced crisis showing no signs of abating, which has only added more fuel to apprehensions regarding the global economic growth. The International Monetary Fund has presented a grim picture of global economy, expecting it to contract at an annual rate of 3% this year followed by a rebound of 5.8% in 2021. Thus, apprehensions over the global economy have sent investors scurrying for safe-haven assets like gold.
Further, lower oil prices and fears of supply crunch as miners are halting their operations as per government mandates have contributed significantly to the price movement. Notably, the yellow metal has yielded a return of 15.6% year to date.
Gold-backed ETFs have also been seeing impressive demand. Per the World Gold Council, gold ETFs and similar products added 298 tons in first-quarter 2020 — the largest tonnage additions since 2016. Net inflows were reported at $23 billion, the highest quarterly amount ever, in absolute US dollar terms. This was primarily driven by uncertainty regarding the economic impact of COVID-19, which boosted safe-haven demand for gold.
The uncertainty regarding virus's impact on the global economy and the governments’ stimulus measures should keep supporting gold. It will continue to be the preferred investment option supported by the environment of low interest rates and virus-induced global slowdown.
The Gold Mining industry has rallied 51.1% over the past year against the S&P 500’s decline of 5.4%. Notably, the industry falls under the broader Basic Material sector, which declined 25.5%.
The industry currently carries a Zacks Industry Rank #20, which places it at the top 8% of 256 Zacks industries.
Our research shows that the top 50% of the Zacks-ranked industries outperforms the bottom 50% by a factor of more than 2 to 1. Looking at the aggregate earnings estimate revisions, it appears that analysts are gradually gaining confidence in this group’s earnings growth potential. In the past year, the industry’s earnings estimates for the current year have been revised upward by 68%.
We thus believe that the time is right for investors to add some gold stocks to their portfolio. We have employed the Zacks Screener to pick six top-ranked gold stocks. Our research shows that stocks with the combination of a VGM Score of A or B and a Zacks Rank #1 (Strong Buy) or 2 (Buy) offer good investment opportunities.
You can see the complete list of today’s Zacks #1 Rank stocks here.
Our Top Picks
Alamos Gold Inc. AGI: Based in Toronto, Canada, this company has a Zacks Rank #2 and a VGM Score of A. The Zacks Consensus Estimate for 2020 earnings indicates year-over-year growth of 25%. The estimate has moved north by 14% over the past 60 days. The company has a trailing four-quarter positive earnings surprise of 9.82%, on average. The company has a long-term estimated earnings growth rate of 15.9%.
Barrick Gold Corp. GOLD: The Toronto, Canada has an expected earnings growth of 45.7% for the current year. The Zacks Consensus Estimate for the current-year earnings has gone up 7% over the last 60 days. The company has a trailing four-quarter positive earnings surprise of 17.9%, on average. The company has an estimated long-term earnings growth rate of 2%. The company has a Zacks Rank #2 and VGM Score of B.
B2Gold Corp. BTG: The Zacks Consensus Estimate for fiscal 2020 earnings of this Vancouver, Canada-based company suggests growth of 200% over the prior fiscal. The company beat estimates in the trailing four quarters by 23.8%, on average. The stock has a Zacks Rank #2 and a VGM Score of B. The company has a long-term estimated earnings growth rate of 6.8%.
Kinross Gold Corporation KGC: Based in Toronto, Canada, the company presently has a Zacks Rank #1 and a VGM Score of A. The Zacks Consensus Estimate for 2020 earnings has moved up 12% in the past 60 days, indicating year-over-year growth of 42%. The company has a trailing four-quarter positive earnings surprise of 182.5%, on average.
Pretium Resources Inc. PVG. This Vancouver, Canada based company has a Zacks Rank #2 and a VGM Score of B. The Zacks Consensus Estimate for the current fiscal suggests year-over-year growth of 6.4%. The estimate has gone up 37% over the past 60 days. The company has a trailing four-quarter positive earnings surprise of 32.1%, on average.
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Pretium Resources, Inc. (PVG) : Free Stock Analysis Report
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