Gold prices have followed a downward trend since the beginning of this year, primarily due to lower demand. In the first two quarters, demand for gold bars, gold-backed exchange traded funds (ETFs) and gold jewelry was particularly low, leading to lowest global demand for gold in the first half of a year since 2009.
Spot gold price has been falling sharply since its last high of $1,354.95 per ounce on Jan 25. The decline can also be attributed to the strengthening dollar, thanks to the U.S.-China trade war and the recent U.S. sanctions on a number of nations.
However, December gold futures and spot gold were up 0.8% and 0.2%, respectively, on Aug 20. The sharp reversal of the yellow metal after a steep decline perhaps indicates investors’ perception that the metal has achieved its bottom level. Therefore, bargain-hunting investors could take a look at some gold stocks that have solid potential to rebound.
Before we handpick the stocks based on our proprietary methodology, let’s take a look at the broader picture of the gold market.
Demand and Supply Leading to Price Drop
According to a report by the World Gold Council, demand of 964 tons in the April-June quarter declined 4% from the year-ago period.
Gold supply in the same quarter rose by 3% to 1,120 tons from 1,086 tons year over year, further contributing to the price plunge.
Global Geopolitical Tensions Could Boost Gold Prices
Though high local prices in Europe, India and Turkey might keep demand for gold low in these regions, the ongoing geopolitical tensions with the United States should elevate demand in China and Iran.
Moreover, with rising oil prices, demand for gold might get a boost, as managers of oil companies usually buy gold as a protective hedge when oil prices go up. Since the ongoing tensions in the Middle East could further increase crude oil prices, demand for gold is expected to rise.
Gold Stocks to Watch
Northern Dynasty Minerals, Ltd. NAK owns the rights to completely buy the Pebble gold-copper-molybdenum porphyry deposit. Northern Dynasty has the largest deposits of gold and copper in North America. The company carries a Zacks Rank #2 (Buy).
Vista Gold Corporation VGZ is a gold project developer. The company holds a Zacks Rank #2 and has its principal asset in Northern Territory, Australia known as Mt Todd Gold Project.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Kirkland Lake Gold Ltd. KL is headquartered in Toronto, Canada and explores and mines minerals. The company carries a Zacks Rank #3 (Hold) and focuses on gold assets primarily. Over the last 30 days, Kirkland Lake Gold has witnessed an upward revision of 2.8% in its Zacks Consensus Estimate for the current year.
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