MKM Partners See Divergence In Gold Stocks And The S&P; Will The Precious Metal Reach $1,900 Soon?
MKM Partners Chief Market Technician, JC O’Hara told CNBC’s Trading Nation that gold and stocks are no longer taking cues from each other. O’Hara explained that gold is reacting to real yields instead. This takes into account inflation subtracting it from bond yields. Historically, lower yield and higher bond prices make gold an attractive safe-haven.
“As real yields continue to move lower, it makes gold more attractive,” O’Hara told CNBC. “We plotted gold along with real yields and that’s the spread between the U.S. 10-year yield less the 10-year breakeven rate. … Yields have been negative and declining for the majority of 2020, and we see no end to that trend for the foreseeable future.”
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He also explained that the tailwind could boost gold as high as $1,900. The fact the the Federal Reserve continues injecting money into markets could be another green light for gold. Further uncertainty around the coronavirus hasn’t helped levy the situation either.
Will Central Banks Help Gold Stocks?
Federal Reserve Chair Jerome Powell appeared in front of Congress recently. He explained the critical timing of stimulus and firm directives that need to be taken.
”We have entered an important new phase and have done so sooner than expected,” Powell told the House Financial Services Committee. “While this bounceback in economic activity is welcome, it also presents new challenges — notably, the need to keep the virus in check.”
However, we’ve clearly seen that COVID-19 hasn’t been kept “in check”. New cases are driving record levels higher right now. The long and short of it is that the Federal Reserve is trying to remedy the situation with as much cash as possible. But is it creating a bubble for the market and a time-bomb for gold?
In an interview, Gina Sanchez, CEO of Chantico Global said, “We have dropped a money bomb and a money printing effort, not only on the part of the U.S. government but governments around the world. That is going to lead to a continued stimulative effect that will impact gold for years to come.”
Will this pave the road for gold stocks?
Gold Stocks To Watch In July
So this begs the question: What are top gold stocks to watch this month? We can look at both gold mining stocks and gold streaming stocks for that as well.
Top Gold Stocks To Watch: Kinross Gold Corp.
Kinross Gold Stock (KGC Stock Report) has been on the move for most of the year. Despite a few dips in March and recently in June, KGC stock has been resilient. On Thursday, shares climbed back above $7.30. This comes as Fitch recently affirmed Kinross Gold stock’s IDR at BBB and revised its outlook to Positive. RBC Capital also upgraded Kinross Gold stock to Outperform and boosted its target to $7.50.
Top Gold Stocks To Watch: Harmony Gold Mining Corp
Harmony Gold Mining Corp. (HMY Stock Report) is somewhat of an anomaly right now. Not only has it recovered from March lows, this week it made new 52-week highs. When you look at higher-priced gold stocks, most are either still recovering or treading water. Harmony plans to raise $200 million to help finance its South African asset purchase. Last month the company announced that it expects to return to full production toward the middle of July.
Top Gold Stocks to Watch: Gold Fields Ltd.
Similar to Harmony, Gold Fields Ltd (GFI Stock Report) reached fresh 52-week highs on July 2. Since hitting lows of $3.79 in March, GFI stock has jumped by more than 150%. One of its projects is a 50:50 venture with Galiano Gold Inc. (GAU Stock Report) which recently gave an update at the end of June. Galiano updates its 2020 exploration program at the Asanko Gold Mine in West Africa.
“Our first set of drill results from our 2020 exploration program appear to prove up additional mineralization near our processing plant, which we believe will contribute towards our first objective of replacing depletion,” said Greg McCunn, Chief Executive Officer.
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“Cut 2 of the Akwasiso pit is currently being mined and is expected to provide approximately 40% of the ore feed for H2 2020. The drilling program has delineated a third cut at the pit which we expect will allow us to continue mining operations well into 2021.”
Top Gold Stocks To Watch: Wheaton Precious Metals Corp.
Gold streaming company, Wheaton Precious Metals Corp. (WPM Stock Report) has also climbed higher this week. Since early April, the gold stock has been trending along with its 50-day moving average acting as support. While 52-week highs are still sitting at $47.15, WPM stock broke above $44.60 for the first time since late May.
Last month the company announced that its wholly-owned subsidiary, Wheaton Precious Metals International Ltd. signed a non-binding term sheet with Caldas Gold Corp. This was to enter into a Precious Metals Purchase Agreement for the Marmato Project in Colombia.
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