Fed Rates Have Been Slashed Again; A Bullish Signal For Gold Stocks?
The vast majority of gold stocks have been crushed by selling pressure. But unlike the broader markets, this pullback hasn’t been nearly as drastic. While the price of gold has pulled back as much as 15% from its 2020 highs, the S&P (SPY) for example has dropped nearly 30%. Based on this clear difference, something can be deduced, which is investors have used the safe haven of gold to cover losses and retain cash from the general market.
But once concerns around the coronavirus subside, market fundamentals will likely begin to take hold once again. Specifically, investors should begin taking notice of things like the Fed Funds rate, which traditionally dictates interest rates. Investors should also note the massive amounts of money being spent on quantitative easing (QE) to shore up the financial markets.
We can’t forget the potential economic fall-out once the dust settles and businesses begin to reopen for full operations. Right now is an uncertain time for things like travel and even entertainment. Restrictions on restaurants, bars, and nightclubs are beginning to arise this week. With all of this in mind, it could have created the perfect storm for gold stocks to perform. As many have bottomed out, some have remained steadfast in their trends. If the next gold rush should be presenting itself now, there are a few gold stocks to watch this year.
Gold Stocks To Watch: IMC International Mining
First, IMC International Mining (IMCX-Free Report)(IMIMF) has been one of the top gold stocks to watch. Shares have been relatively range-bound for the better part of the last 3 weeks. The junior gold discovery stock has traded in a range of $0.3 to $0.40 in the U.S. In Canada, IMC has been a bit more lively but has also maintained a general level of support above $0.40CAD. Last week the gold stock managed to test its 52-week high of $0.50 CAD for the second time this year.
What’s helped drive momentum for the company? Aside from the concern over the coronavirus and declining rates, IMC could be somewhat of an anomaly following its last update. In February the company announced a letter of intent to acquire Thane Minerals. In line with this, the company reported that is plans to close on this acquisition during the middle of the month. Seeing as the timing of this could directly coincide with a pending gold rally, it may be a reason why the markets have held this latest trend.
Thane’s Cathedral property is the main site in question. Located in the Quesnel Terrane, the area boasts significant past and planned production figures. These include 50 billion pounds of copper, 28 million ounces of gold, and includes 16 producing and development projects. So as the markets could anticipate the next move for gold, there’s also time-sensitivity for IMC and its pending acquisition. Something to keep in mind for those putting together a list of junior gold stocks to watch right now.
Gold Stocks To Watch: Yamana Gold
One of the key indicators that gold stocks could be back in focus is based on the massive rebound seen by some of the more beaten-down names. Yamana Gold (AUY) was one of the gold stocks that have tumbled in recent weeks. Since hitting 2020 highs of $4.94, Yamana gold stock has dropped as low as $2.23 this month. However, the company has come back in a big way at the start of the week.
After reaching levels not seen since last summer, Yamana gold stock has bounced back by as much as 28.7% from Monday’s opening bell. The act that gold stocks are rallying even as the broader markets are stutter-stepping could indicate what I said above may be true. The flight out of stock hasn’t subsided yet there appears to be a return back into gold names.
While the week will dictate the certainty of this sentiment, Yamana remains focused on its plans to streamline operations. In its most recent update, the company reported that it sold off its Royalty interests and contingent payment to be received at the Deep Carbonates Project to Guerrero Ventures. At a price o $65 million, this is no small transaction. But to the benefit of Yaman, it also gives the company a stake in a newly created company with a $45 million stake. The company stated, “This model is similar to the approach that Yamana took with the creation of its Brio Gold subsidiary, which subsequently became a successful standalone public company and continues to provide valuation upside to Yamana today following Brio’s acquisition by Leagold Mining Corporation and Leagold’s pending merger with Equinox Gold Corp.”
Gold Stocks to Watch: Barrick Gold Corp
Next, Barrick Gold Corp (GOLD) has also rebounded aggressively this week. Shares dipped to lows of $12.65 during the very first 30 minutes of trading on March 16. Since then, Barrick gold stock has bounced back by as much as 35.5%. Keep in mind that many gold stocks have bounced back above their previous closing prices from March 13. The S&P is still considerably lower than where it finished the week at last week.
The surge in price for Barrick gold stock is likely another example of a flight back to safe havens. Prior to the last dip, analysts echoed bullish sentiment for Barrick. UBS, for example, upgraded the company’s stock to Buy from Neutral. It currently holds a price target of $22. This came just after the company’s last update.
Barrick announced that it plans to expand its Pueblo Viejo gold mine. It would also extend significant contributions to the Dominican Republic’s economy until 2040 “and beyond”. Barrick CEO Mark Bristow said the “project would require an initial investment of $1.3 billion to expand the process plant and the tailings facility1. Extending its life would unlock the mine’s potential to increase exports by $22 billion and generate more than $4 billion in taxes at a gold price of $1,500 per ounce.”
Gold Stocks To Watch: Kinross Gold
Similar to the other gold stocks today, Kinross Gold (KGC) has also managed an aggressive reversal in price on March 16. After retreating to pre-2019 levels in the morning, Kinross gold stock jumped back by more than 40% on Monday.
Trouble had hit the company after announcing the closure of its Toronto office earlier this month. One of the workers at the office had tested positive for COVID-19. As a precaution, the company shut the office down for cleaning and disinfection. While this was a preliminary period of selling, it looks like the gold rally could be back in motion once again.
After gold prices reached lows of $1,450.90 Monday morning, the rally soon began after a market-wide halt. Since reaching last summer’s trading levels, gold prices have broken back above $1,500 once again. While the entire sector realizes a lift, could this mark the next leg in gold’s multi-year bull run?
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