Is It Time To Buy Gold Stocks?
On January 2, 2020, the S&P opened for trading at $3244.67. The index hasn’t opened at or above that level since February 21st. But for the first time since the major sell-off in the stock market this year, the S&P500 opened positive for the year. The index traded at $3268.52 on July 21 and quickly printed a new high of $3,277.29 shortly thereafter.
That’s it, the gold trade is done, right? On the contrary, as the popular opinion may assume such a case, gold prices made new highs on July 21. These weren’t new all-time highs but the previous metal printed a high of $1,843.70 during the early morning trading hours. Even after pulling back to a low of around $1,836, gold prices aggressively bounced back above $1,840 before 10 AM EST.
This move comes after some global fiscal stimulus news out of Europe. European Union officials agreed to a $2 trillion economic rescue spending plan. It hinges on the bloc issuing common bonds for the first time ever. What’s more, is that silver prices also surged. For the metal, it was the biggest one-day price move it has seen in months. Silver prices raced to highs of over $21.60 for the first time since 2014. Government spending across the globe has posed a unique scenario for precious metals, especially in a low-rate environment.
Are Analysts Still Bullish On Gold?
Earlier this year we talked about big banks placing long bets on precious metals like gold and silver. Some of the top investment banks in the world have taken a bullish stance on gold. These include Citi (C stock report), Goldman Sachs (GS stock report), and Bank of America (BAC stock report). Recently Goldman raised its expectations for gold prices.
The investment bank now estimates gold prices to reach $1,800, $1,900, and $2,000 within the next 3,6, and 12-months respectively. HBSC also reported that the increase in unemployment and fiscal stimulus measures could result in a bigger move for gold prices. With that being said, here are two top gold stocks to watch during the COVID-19 Pandemic.
HSBC Chief Precious Metals Analyst James Steele said to CNBC, “The two most populous nations in Asia are also the world’s two largest gold importers and consumers. Further escalation in risks could prompt greater gold purchases. Gold may dip near term, but $1,700/oz should hold. It looks to us that there is sufficient risk to support gold as the year unfolds. We also look for silver to trek higher, aided by gold.”
However, with such a huge surge of momentum, does this bring mining stocks to unsustainable highs? It begs the question as to whether or not you should start looking for gold stocks to buy or totally avoid the sector right now.
Top Mining Stocks To Buy [or sell] #1: Northern Dynasty Minerals
Northern Dynasty Minerals (NAK Stock Report) has been on the move for months now. However, this week could be an important one for NAK stock. The determining factor has a lot to do with the pending release of the Final Environmental Impact Statement for Alaska’s Pebble Project.
CEO Tom Collier said earlier this month, “It is our understanding based on conversations with the U.S. Army Corps of Engineers (USACE) that the final EIS will be published in the Federal Register on July 24th. This will mark one of the most significant milestones for the Pebble Project. Following the final EIS, the USACE will use this document as it prepares the Record of Decision (ROD) for Pebble – a step expected to follow the publication of the final EIS.”
NAK stock has exploded since the start of the week. On Tuesday, the mining penny stock reached new highs of $2.22 during premarket trading. It hasn’t traded this high since 2017. Northern Dynasty is a mineral exploration and development company based in Vancouver, Canada. Its principal asset, owned through its wholly owned Alaska-based U.S. subsidiary, Pebble Limited Partnership. The asset is a 100% interest in a contiguous block of 2,402 mineral claims in southwest Alaska, including the Pebble deposit. The Partnership is the proponent of the Pebble Project, an initiative to develop one of the world’s most important mineral resources.
Top Mining Stocks To Buy [or avoid] #2: Endeavor Silver Corp.
As I said above, silver is on fire this week and it would be odd to not discuss at least one silver stock on this list of mining stocks. Aside from the price of silver giving sector stocks a boost, analysts have turned bullish on Endeavor Silver stock (EXK Stock Report). B. Riley FBR is the latest firm to weigh in on the company. It initiated coverage with a Buy rating and a price target of $4.75. This comes just a few weeks after TD Securities, BMO, and HC Wainwright all lifted price targets on the silver stock. Here’s the breakdown:
Earlier this month the company reported abbreviated second quarter production figures. It produced 596,545 silver ounces (oz) and 5,817 gold oz in Q2, 2020, for silver equivalent (“AgEq”) production of 1.06 million oz at an 80:1 silver:gold ratio (1.18 million oz at 100:1 ratio).
Endeavour Silver Corp is a precious metal mining company. The company is primarily engaged in silver mining and owns three high-grade, underground, silver-gold mines in Mexico. Its other business activities include acquisition, exploration, development, extraction, processing, refining and reclamation.
Top Mining Stocks To Buy [or avoid] #3: Yamana Gold
Yamana Gold (AUY Stock Report) hit a fresh 52-week high on Tuesday. $6 was printed early in the session as gold drove higher. The company said on Monday that it’s looking to pay a dividend in a range of $50 to $100 per gold ounce annually for shareholders.
In an interview with Reuters, Executive Chairman Peter Marrone said they are planning to raise dividends from the current payout of $60 to $65 per ounce, which would “imply that we have room for upside.” At the end of Q2, Yamana Gold has more than $320 million in cash, while its net debt decreased by $100 million to less than $769 million, according to a news release. The company is also looking to list on the London Stock Exchange as well.
“This is an ideal time to be to be joining the London market. Yamana is in as strong a position as it has ever been, with a strong and rising cash flow profile, an outstanding portfolio of producing mines and projects, and a number of compelling opportunities to grow organically. We have the balance sheet strength to advance these opportunities while continuing to increase shareholder returns, as evidenced by the three increases to our dividend over the past 12 months,” said Peter Marrone, Executive Chairman of Yamana Gold.
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