While the broader markets flip-flopped on Monday, gold prices and gold stocks shined. It was one of the few asset classes that actually made new highs at the start of the week. Worries continued to persist about the coronavirus outbreak that has plagued markets recently. That trend may not end in the near term.
As reported by the Washington Post, the CDC has urged no nonessential travel to China. There have been at least 82 deaths so far and more than 50 million people have been quarantined. The Centers for Disease Control and Prevention raised its travel warning to a level 3 on Monday. This is the highest alert level and urged U.S. citizens to avoid travel to China entirely. With such concern, it’s understandable that people may look to find safe havens to store their money.
Gold along with gold stocks are well-known for this. Gold has now climbed more than 20% within the past year. This week it has continued to climb closer to that $1,600 mark; the highest levels since 2013. This has also helped pull other precious metals higher. Silver, platinum, and others have seen a rally in the market. Still, though, there are some who wonder if gold can make brand new highs in the near-term.
Gold Ready To Make New Highs?
The last time gold made new all-time highs was when it breached $1,900 in 2011. This was during Europe’s debt crisis. Needless to say, there were several gold stocks and mining stocks that went against the downtrend of the broader markets on Monday. Newmont gold stock (NEM – Free Report) climbed to highs of $45.36. The gold miner hasn’t seen trading levels like these since the summer of 2016. Before that, shares of Newmont didn’t trade that high since 2013. So it stands to reason that something is going on with gold that we haven’t seen in quite some time.
“There are a lot of things that could go wrong for the stock market and the economic impact of a China slowdown from the coronavirus could be felt globally.”David Beahm, president and CEO of Blanchard & Company
The appetite for investors could be supported even more by these growing fears. There’s a true uncertainty that has evolved since the first cases were identified. Where a few days ago these fears ebbed a bit, another big event happened regarding the outbreak. Lukman Otunuga, senior research analyst at FXTM explained that “The general uncertainty is likely to accelerate the flight to safety with gold seen testing $1568 in the short term.”
Gold Stocks Make History Again
Further evidence brings us to understand the real magnitude of this lastest move. The SPDR Gold Trust ETF (GLD – Free Report) also made new highs on Monday. During the morning session, the ETF reached highs of $149.32. This level was one the Gold Trust hadn’t traded at since April of 2013. In fact, the gold ETF has made a methodical move up ever since bottoming out at lows of $100.23 at the end of December 2015.
Still, other gold stocks continued to break new highs. EMX Royalty (EMX – Free Report) reached new highs this month that it hadn’t traded at in nearly 7 years. DRDGold (DRD – Free Report) also hit new 52-week highs of $6.25. Though these weren’t new 7-year highs, the trend does echo the same sentiment as the rest of the sector. Two weeks ago, Sibanye-Stillwater (SBGL – Free Report) excersized its option in DRD. It now owns 50.1% of DRDGOLD after exercising its option.
“By securing the majority holding in DRDGOLD, a leading surface mining and processing company, we continue to create value for all stakeholders in line with our vision,” said CEO of Sibanye-Stillwater, Neal Froneman. “We are thrilled that the value of our initial shareholding has already increased by 147% over 17 months. The DRDGOLD team has a proven track record and has successfully implemented the Far West Rand Recoveries project, having reached its 500,000 tonne per month planned capacity for Phase 1. We look forward to further value creation as DRDGOLD completes its detailed planning and possible implementation of Phase 2”.
Time To Buy Gold Stocks?
With groups like the International Monetary Fund (IMF) suggesting global growth slows down this year and gold purchases increasing, it could make sense to pay attention to the yellow metal. According to data from the World Gol Council, central bank gold purchases jumped by 12% during the first 3 quarters of 2019. That’s compared to the same period in 2018. The banks added over 545 metric tons of net gold.
“The Fed and other central banks have been pouring money into the market. With money flow driving stocks instead of earnings, that makes people more jittery,” said Ralph Aldis, a portfolio manager with US Global Investors to CNN.
As the broader stock market could be growing more volatile thanks to the election, there are mounting potential catalysts to keep in mind. All things considered, no matter how “slow” gold has moved to start the year, the facts remain that the bull run hasn’t come to an end.
“This year will be another one of double digit percentage growth for gold. It could hit new all-time highs and top $2,000 — if not this year then sometime soon on the horizon.”David Beahm, president and CEO of Blanchard & Company