Gold Posted Its 1st Red Day In 2 Weeks; Is The Party Over?
For the first time in 2 weeks, gold prices went red on the day. On Thursday the price of gold didn’t record a new, all-time high as it has during the last few sessions. In fact, it went red. Despite opening much higher than previous all-time high levels from 2011, gold prices failed to break back above $1,975 by the end of the session. Something else to note is that gold trading volume was the second lowest in the trailing 8-day period. In light of this, it begs the question, “Is the gold rally over?”
“The charts, as interpreted by Carley Garner, suggest that the recent rallies in gold and silver are very precarious,” “Mad Money” host Jim Cramer said this week. “She thinks they could both have one last leg higher, and it might even be substantial, but after that she expects the precious metals to come plummeting back to earth.”
Garner is co-founder of DeCarley Trading and the author of the book “Higher Probability Commodity Trading.” Cramer further cited gold and the dollar index typically trade opposite of one another. Both charts traded along a similar trend line between March and May before returning back to normal in June. In light of the recent trading activity, the expectations are still high that gold continues along its current trajectory.
Garner said she could see the price of gold rising as high as $2,000, or potentially $2,300 in another scenario, before hitting its peak. However, the downside trade to gold could be swift if or when it happens. Cramer explained that “When a gold boom goes bust, it gets really ugly. Once the meltdown starts, Garner thinks we could trade down to $1,525 or $1,450.”
Are Gold Stocks Still A Buy?
The latest crack in gold has obviously become a cause for concern among some investors. But does that mean the gold trade is over? If you were to look at stocks like Barrick Gold (GOLD Stock Report) or B2Gold (BTG Stock Report), two companies in the spotlight recently, neither were able to secure new highs on July 30th. This is the 3rd and 2nd day of not reaching new 52-week highs, respectively. It’s likely a simple case of these two gold stocks being tightly tied to the price of gold. Well, after looking at a few gold stocks today, even with gold prices slipping, a few actually reached new 52-week levels.
Agnico Eagle Mines Ltd.
Shares of Agnico Eagle Mines Ltd (AEM Stock Report) reached a high of $76 on Thursday and ended up closing just shy of it at $75.33. Considering that it opened down from Wednesday’s close, it was a big move in the gold stock.
This came as two analysts raised price targets on Thursday. TD Securities maintained Agnico Eagle Mines with a Buy and raises the price target from $77 to $91. ScotiaBank upgraded Agnico Eagle from Sector Perform to Sector Outperform and raises the price target from $65 to $72.
This week, Agnico Eagle joined other gold companies in reporting earnings. Agnico on Wednesday reported Q2 adjusted EPS of $0.18, without a year-ago comparison. That exceeded the $0.17 consensus estimate of analysts polled by Capital IQ. GAAP EPS increased to $0.43 from $0.12.
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Revenue rose to $557.2 million from $526.6 million. The result beat the analysts’ estimate of $545.8 million. Agnico maintained its quarterly cash dividend at $0.20 per share, payable on Sept. 15 to shareholders of record as of Aug. 31.
Golden Star Resources Ltd.
Another one of the gold stocks reaching new 52-week highs was Golden Star Resources Ltd (GSS Stock Report). Shares of GSS stock reached a high of $4.41 during the morning session and finished the day at $4.36. This week was a big week of news for the company. First, it entered into a binding agreement for the sale of its 90% interest in its Bogoso-Prestea Gold Mine in Ghana. The sale was to Future Global Resources Limited for a purchase price of up to $95 million. Specifically, the purchase price is $55 million with a further contingent component of up to $40 million.
Following this, some analyst actions by H.C. Wainwright saw the firm boost its price target to $5.25 and maintain a Buy rating on the stock. Similar to Agnico, Golden Star also reported earnings this week. Q2 2020 production totaled 50.6 thousand ounces, versus 48.4koz in Q2 2019. Furthermore, gold sales totaled 52.7koz in Q2 2020 and 98.3koz in H1 2020. On top of that, Q2 2020 cash flow from operations (before working capital changes)totaled $27.1m, more than double the $13.4m achieved in Q1 2020.
Andrew Wray, Chief Executive Officer of Golden Star, commented:
“The overall performance of the business during the second quarter remained in line with our expectations, despite the challenges faced from the ongoing COVID- 19 pandemic. This was principally due to the strong performance delivered by Wassa where we saw an 18% improvement in underground grades compared to the previous quarter and mining rates were maintained well in excess of 4,000tpd. Costs remained well managed and cash generation was strong over the quarter, with incremental cash flow from the lower grade stockpiles processed albeit they added around $15/oz to the reported AISC at the site.”
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