Following a volatile last week, some investors might expect markets to see some smooth sailing this week. However, concerns surrounding global economic growth haven’t ebbed as the U.S.-China trade tussle continues. What’s more, protests in Hong Kong along with a crash in the Argentine peso drove investors to safe-haven assets like gold.
Spot gold prices in its last trading session ended 0.96% higher to close at $1511.2 per ounce. Needless to say, gold price has scaled to a six-year high of late. Given the upside potential of gold, investing in stocks that have significant exposure to this metal seems prudent.
Sino-U.S. Trade War Lingers
Markets have been plagued by U.S.-China trade tensions. Trump has said that a near-term deal with China on tariffs is unlikely anytime soon. He also said that he may cancel the upcoming September meeting of Sino-American trade negotiators.
The United States might impose 10% tariffs on $300 billion of Chinese products starting Sep 1. The President aims to extract trade concessions from China on a wide range of issues, including intellectual property theft and currency manipulation.
Meanwhile, China let its currency value decline in order to make some Chinese goods cheaper and negate the effects of U.S. tariffs. China also retaliated by suspending purchases of American farm crops. And with the trade deal showing no signs of progress, the global economy is sure to get affected. In fact, financial behemoth The Goldman Sachs Group, Inc. GS has warned that the U.S.-China trade war is raising the chances of a near-term recession.
Hong Kong Unrest
Let’s admit that the Chinese government is now more concerned about Hong Kong than it is about trade. The Hong Kong international airport, known to be one of the busiest cargo airports, was shut down due to heavy protests. In fact, almost 5,000 protestors flooded the airport, leading to the cancellation of many flights.
Protestors are opposing a proposal that would allow extradition to mainland China, something that would threaten their judicial protection. Protestors also want Hong Kong leader Carrie Lam to officially withdraw the extradition bill. China, in the meanwhile, said that Hong Kong is now at a “critical juncture.”
What’s more threatening is that China may bring in the People’s Liberation Army to suppress the crowd. And with pro-democratic democracy protests in Hong Kong showing no signs of tapering off, the unrest has affected bourses worldwide, including the three main U.S. equity indexes.
Argentine Stock Market Tanks
Argentina, by the way, added to the tensions. The Argentine stock market recently slumped more than 30% after market-friendly President Mauricio Macri lost the Presidential primaries by a much wider margin than expected.
While Macri and his running mate Miguel Angel Pichetto garnered 32.1% of the votes, their opposition center-left Alberto Fernandez, whose running mate is populist ex-leader Cristina Fernandez de Kirchner, received 47.7%.
Argentina’s peso shed almost 25% compared to the U.S. dollar. The election results also dragged Argentina’s euro-denominated bond down by nearly 9 cents, per data reported by Reuters. The yield, which has an inverse relation to the price, went up almost 3%.
Market Mayhem a Boon for Gold
With Trump not ready to strike any deal with China, and the turmoil in Hong Kong and Argentina adding to trade tensions, the appeal for gold as a safe-haven asset has increased. And as the bullion metal glitters, gold mining stocks have a fair chance to gain. We have, thus, selected four stocks that flaunt a Zacks Rank #1 (Strong Buy) or 2 (Buy).
AngloGold Ashanti Limited AU operates as a gold mining company. The company has a Zacks Rank #2. The Zacks Consensus Estimate for its current-year earnings has moved up 10.9% over the past 60 days. The company’s expected earnings growth rate for the current year is 111.3% compared with the Mining - Gold industry’s estimated rally of 11.2%.
Kinross Gold Corporation KGC engages in the acquisition, exploration and development of gold properties in the United States. The stock currently has a Zacks Rank #1. The Zacks Consensus Estimate for its current-year earnings has climbed 100% in the past 60 days. The company’s expected earnings growth rate for the current year is 140%. You can see the complete list of today’s Zacks #1 Rank stocks here.
Barrick Gold Corporation GOLD explores and develops mineral properties. The company primarily explores gold, copper, and silver deposits. The stock currently has a Zacks Rank #2. The Zacks Consensus Estimate for its current-year earnings has advanced 17.9% in the past 60 days. The company’s expected earnings growth rate for the current year is 31.4%
Kirkland Lake Gold Ltd. KL engages in the acquisition, exploration, development, and operation of gold properties. The stock currently has a Zacks Rank #1. The Zacks Consensus Estimate for its current-year earnings has increased 7.2% in the past 60 days. The company’s expected earnings growth rate for the current year is 63.2%.
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The Goldman Sachs Group, Inc. (GS) : Free Stock Analysis Report
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