Gold prices moved downward for nearly one and half months after witnessing an impressive rally during the June-September period. The Wall Street rally and a stronger dollar are the primary reasons for the gold price decline.
On Nov 12, gold price for December futures on Comex dropped $3.4 or 0.2% to settle at $1,453.70 per announce. This marked the four straight session of price decline and the lowest settlement for an active contract since Aug 1.
However, recent softness in gold prices may be a good entry point. Trade-related conflict between the United States and China is far from being completely settled. Meanwhile, a slowing pace of U.S. economic growth and global economic downturn are near-term concerns.
Trade Tussle Continues
On Nov 12, President Donald Trump delivered a speech at the Economic Club of New York, where he said a U.S.-China trade deal “could happen soon,” and added that a phase one agreement is “close.” The partial trade deal was scheduled to be signed by both sides in mid-November. However, it has already been postponed to next month.
At the same time, he threatened more tariff hikes on Chinese imports if the trade negotiation fails to produce an interim agreement. Trump has categorically mentioned that he would only accept the interim trade deal if the agreement worked to the advantage of U.S. workers and businesses.
In a strong statement, he said “since China’s entrance into the World Trade Organization in 2001, no one has manipulated better or taken advantage of the United States more.” “I will not say the word ‘cheated,’ but nobody’s cheated better than China, I will say that.”
On Nov 8, President Donald Trump told reports that he hasn’t agreed so far to roll back the existing tariffs in phases that his administration imposed on Chinese goods over the past one and half years. Moreover, senior U.S. Trade Advisor Peter Navarro said that no formal agreement has taken place between the United States and China to remove tariffs on each other goods.
Global Economic Downturn
On Oct 15, The International Monetary Fund (IMF) reduced its 2019 and 2020 growth forecasts for the global economy. It predicts growth of 3% for 2019, down from its previous forecast of 3.2%. For 2020, the IMF projects growth of 3.4%, lower than its previous projection of 3.6%. Moreover, the World Bank also squeezed its global growth forecast for 2019 to 2.6% from the previously forecast 2.7% growth.
On Sep 19, the Organization of Economic Co-Operation and Development (OECD), projected that the world economy will grow just 2.9% in 2019, the lowest forecast since 2009. The OECD had forecast 4% global growth in 2019 just 18 months ago.
Notably, China’s third-quarter 2019 GDP growth came in at 6%, the lowest in 27 and half years. Several large economies of Eurozone, Japan and certain emerging markets are also suffering from lower export demand due to the prolonged trade conflict between the two largest trading countries of the world. The growth rate of U.S. GDP also declined serially in the first three quarters of 2019.
Our Top Picks
At this stage, it will be prudent to invest in gold stocks with strong growth potential. We have narrowed down our search to five such stocks, which have skyrocketed year to date and still have upside left. Each of these stocks carries either a Zacks Rank #1 (Strong Buy) or 2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The chart below shows price performance of our five picks year to date.
Franco-Nevada Corp. FNV is a gold-focused royalty and stream company with additional interests in platinum group metals and other resource assets. The company has an expected earnings growth rate of 39.3% for the current year. The Zacks Consensus Estimate for the current year has improved by 3.2% over the last 30 days. The Zacks Rank #1 stock has surged 39.5% year to date.
Kirkland Lake Gold Ltd. KL is engaged in the provision of mining and mineral exploration. It focuses on gold assets primarily in Canada and Australia. The company has an expected earnings growth rate of 96.3% for the current year. The Zacks Consensus Estimate for the current year has improved by 14.6% over the last 30 days. The Zacks Rank #1 stock has jumped 75.9% year to date.
Agnico Eagle Mines Ltd. AEM is engaged in the exploration, development and production of mineral properties in Canada, Mexico and Finland. It primarily produces and sells gold deposit, as well as explores for silver, zinc, and copper deposits. The company has an expected earnings growth rate of 168.6% for the current year. The Zacks Consensus Estimate for the current year has improved by 17.1% over the last 30 days. The Zacks Rank #1 stock has soared 43.8% year to date.
Kinross Gold Corp. KGC is engaged in the acquisition, exploration and development of gold properties in the United States, the Russian Federation, Brazil, Chile, Ghana and Mauritania. The company has an expected earnings growth rate of 210% for the current year. The Zacks Consensus Estimate for the current year has improved by 14.8% over the last 30 days. The Zacks Rank #2 stock has climbed 32.4% year to date.
Sandstorm Gold Ltd. SAND is focused on completing gold purchase agreements with gold mining companies that have advanced stage development projects or operating mines. The company has an expected earnings growth rate of 166.7% for the current year. The Zacks Consensus Estimate for the current year has improved by 33.3% over the last 30 days. The Zacks Rank #2 stock has soared 43.3% year to date.
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Kinross Gold Corporation (KGC) : Free Stock Analysis Report
Sandstorm Gold Ltd (SAND) : Free Stock Analysis Report
Franco-Nevada Corporation (FNV) : Free Stock Analysis Report
Agnico Eagle Mines Limited (AEM) : Free Stock Analysis Report
Kirkland Lake Gold Ltd. (KL) : Free Stock Analysis Report
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