3 Gold Stocks To Watch This Month
Gold stocks continue to trade in close comparison to the price of gold. This is for obvious reasons and you don’t need to be an analyst to understand the theory. Gold mining stocks thrive when their businesses thrive. If gold prices are climbing, that bodes well for revenue.
Something we have seen recently, however, is that when the price of gold pulls back, gold stocks aren’t as quick to dip. On Friday, gold futures fell during the second half of the session to lows of $1,710.70. This falls within the 4-week range that prices have flip-flopped between since early April.
But is the best still yet to come for gold stocks? There’s a seemingly unlimited level of monetary expansion at play right now. This is likely a big reason why even as stock climb, so does the price of gold. The sheer level of money flooding into the market from the Federal Reserve is the stuff of legend. Nothing of this magnitude has been seen in recorded history and it really makes you wonder how it will be handled after the economy is running at 75% or better.
Long Runway For Gold Prices?
The recent economic state has been dominated mostly by deflationary measures. This week we found that unemployment has reached nearly 15% as COVID-19 strangled the U.S. economy. But this most likely understates the actual real figures as many may simple not have filed for unemployment at all. In addition to this, you still have crude oil prices on shaky ground. While they aren’t at record lows, crude oil prices seem to be on a razor’s edge each week with new build data.
In any event, the world is looking for reasons to be optimistic about the economy’s future. Today we saw unemployment numbers come in at a record figure. But since they weren’t as bad as analysts expected, that was a “good thing” in the eyes of the market. While it’s hard to understand how a record can be set on one hand and optimism is the approach, on the other hand, this is a stock market metric many still need to grasp.
What happens when the economy gets back to some sort of normal? The likely result could be inflation. High unemployment and pricing preasures may not trigger inflationary situations in the near term but it is one that many long-term investors are beginning to take under consideration.
“It is not a stretch to think we could experience persistent and elevated goods inflation in the coming years. Keeping in mind, this is not something we have witnessed here in the U.S. in decades. We think the trade war has set this very real possibility in motion, and Covid-19 is likely just pushing it further upfield. We are talking about supply chains.”Tom Porcelli and Jacob Oubina, economists at RBC Capital Markets
Best Climate For Gold Stocks
Gold is widely considered an inflationary hedge because its price in U.S. dollars is variable. If you’re unfamiliar with the basics of an inflationary hedge, let’s break it down. Gold and inflation are paired in the aspect of when inflation increases and the dollar’s value decreases, gold will go up in price. Inflation tends to essentially erode the value of the dollar.
With gold as a hedge, even as the dollar declines further in value, gold will either hold steady or, as it does in most inflationary settings, increase in value. Keep in mind that all-time highs for the price of gold still sits at $1,923.70. The high this year is $1,788.80. Seeing as we haven’t even entered an inflationary period yet, where do you feel the price of gold will be when we do?
With a bullish gold price, gold stocks have regained a much brighter luster this year. Many have reached new highs not seen in over 7 years. A few have even reached all-time highs in 2020. So what are the best gold stocks to buy right now? That choice is yours but let’s take a look at some popular gold stocks to watch in May.
Barrick Gold (GOLD)
Shares of Barrick gold stock (GOLD Stock Report) continue to hold a base above $25. Late last month Barrick reached a new 2020 high of $28.50 and a level it hadn’t traded at in 7 years. Is Barrick gold stock near all-time highs? The short answer is no and by a far distance too.
Back in 2011, Barrick gold stock reached highs of $55.95 amid the biggest gold rally in history. Analysts remain bullish on the stock. Deutsche Bank recently upped its price target to $34 from $25. The bank also maintains a Buy rating on Barrick Gold stock.
IAMGOLD Corp (IAG)
Another one of the popular gold stocks to watch this month is IAMGOLD Corp. (IAG Stock Report). Shares of IAG stock jumped to highs of $3.73 on May 8 maintained a new base above its 200 Day Moving Average, which sits around $3.30. Earlier this year shares dipped as low as $1.44 amid the big gold stock breakdown of 2020.
Since then IAG stock has been back on the move as the price of gold pushes higher. Analysts at BMO Capital, however, recently lowered their price target to $3.50. But the firm maintained a rating of Perform for IAG stock. Last month the company resumed operations at its Westwood Gold Mine after receiving confirmation from the Quebec government that “mining is an essential business activity.”
New Gold Inc. (NGD)
Another one of the gold penny stocks to keep an eye on is New Gold Inc. (NGD Stock Report). As the “cheap gold stock” on the list, NGD stock fell to lows of $0.39 earlier this year if you can believe that. But ever since, it has been a V-shaped recovery. This week, it firmly broke above its 200 Day Moving Average around $0.93 and continues trading around the $1 mark.
What’s more, is that NGD stock tested its 2020 high for the first time this year. Back in January, the gold stock reached a high of $1.07 but never managed to retest that. In its last earnings report, the company cited that it has a strong liquidity position. of $600 million.
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