Investors Start Flocking Back To Gold
Thursday saw gold and gold stocks move slightly higher after the latest economic data. On top of that, while expectations were for a smooth reopening, states are starting to see something different. That something could be another wave of the virus. “You’re seeing the psychology in the market get retested today,” said Dan Deming, managing director at KKM Financial. “The sense is maybe the market got ahead of itself, which makes sense given the fact that we’ve come so far so fast.”
Traders are considering the recent uptick in coronavirus hospitalizations and a rough few years for the U.S. central bank into their strategy. On Wednesday, the Associated Press reported new findings. Texas has reported three consecutive days of record-breaking COVID-19 hospitalizations. Nine California counties are reporting a spike in new coronavirus cases or hospitalizations of confirmed cases.
Meanwhile, we’ve got thousands of people either rioting or, at the very least, protesting in droves. This could also be a key catalyst to potentially mass-transmit viruses simply due to close quarters of thousands of people. If you remember back at the start of coronavirus, energy and travel stocks took the brunt of the hit compared to some of the other sectors. This also triggered a flight (no pun intended) to safe-haven investments like gold and gold stocks.
Will New Highs Be In The Cards For Gold Prices?
If you’re looking for a gold price breakout move, you might need to wait a bit. Even with the latest market sell-off, and lack of monetary policy changes, gold might be a cautiously optimistic class right now. If you look at the chart of gold futures, it’s been a slow grind for the last few months.
For the most part, major moving averages like the 200-Day and 50-Day Moving Averages have continued to act as firm levels of support. Even this past March when everything sold off, the broader markets dipped well-below key supports. Gold and most gold stocks were more or less “saved” by the 200DMA “net”. Furthermore, since last August, gold has been in a clear and consistent uptrend following the 50DMA closely.
“You almost couldn’t come up with a better script for a strong fundamental environment for gold than what we saw from the Fed yesterday,” Matt Weller, global head of market research at Gain Capital Group LLC, said to Bloomberg this week.
“It’s really an environment of rampant monetary stimulus, and historically that’s exactly the type of environment in which gold has thrived.”
There’s also support for the price of gold and, in turn, gold stocks, from analysts right now. Goldman Sachs Group (GS Stock Analysis) forecasts bullion to jump to $1,800 over the next 12 months. The bank said it might even reach $2,000 if inflation rates jump. This would be a similar situation that was seen during gold’s last historic bull run.
What Are Some Gold Stocks To Watch Right Now?
Considering that gold stocks may seem to feel some impact from broader markets selling off, don’t forget what we saw in March. As stocks continued to fall in a flight to cash, gold did its job as a safe haven, dipped, then saw a flight back to it from investors later that month. Then again, should gold be higher right now and if so why isn’t it?
“There’s probably some disappointment among investors that the Fed stopped short of embracing the yield-curve control, which would be a strong trigger for gold…So being the devil’s advocate, I worry a bit why the metal hasn’t responded better than it did.”Ole Hansen at Saxo Bank A/S said to Bloomberg
But this hasn’t discounted the fact that there are some gold stocks to watch right now.
Newmont Corporation (NYSE: NEM)
Shares of Newmont Corp. (NEM Stock Analysis) have bounced back a bit from their June low of $52.33. Despite dropping on the 11th, NEM stock price is still up more than 25% for the year. This month Newmont published its 2019 Sustainability Report, Beyond the Mine, transparent and comprehensive disclosure of the Company’s environmental, social, and governance performance.
“Our sustainability report provides investors and other stakeholders a transparent and detailed look at look at our safety, environmental and social performance,” said Tom Palmer, President and Chief Executive Officer. “In 2019, we completed two transformative transactions whilst enhancing our ESG performance to align with our position as the world’s leading gold company.”
Franco-Nevada Corp (NYSE: FNV)
Similar to NEM, Franco-Nevada Corp (FNV Stock Analysis) has also pulled back on the 11th but is maintaining its 5-day uptrend for the most part. After dropping from 52-week highs of $152.70, the last 5 days have proven bullish in a turnaround. Shares of FNV stock have straddled the 50-Day Moving average. Since the start of the year, Franco-Nevada stock is up over 25% as well.
In its last earnings update, Franco-Nevada reported adjusted earnings of $0.58 per share in first-quarter 2020. This was up 65.7% from the prior-year quarter. The company generated revenues of $241 million in the reported quarter. This was a year-over-year jump of 34%. Furthermore, 89% of revenues were from gold and gold equivalents (69.4% gold, 9.2% silver, 9.4% platinum group metals and 1% from other mining assets).
AngloGold Ashanti Ltd (NYSE: AU)
AngloGold was another one of the gold stocks treading water on Thrusday. In spite of this, shares still maintained the 5-day uptrend that began on June 5th. AngloGold Ashanti (AU Stock Analysis) dropped hard earlier this year. AU stock price fell as low as $12.66 but since then, have bounced more than 100%. In fact, in mid-May, AU stock reached new 52-week highs of $28.
According to reports, AngloGold, which shut its Mponeng mine for more than a week after 196 workers tested positive for COVID-19, plans to gradually ramp up to half of its capacity at the gold mine in South Africa. This was reported by Reuters earlier this month.
“Our aim is a gradual ramp-up to 50% capacity,” spokesman Stewart Bailey said in an emailed statement to Reuters. The report said it began a phased restart of Mponeng on Monday with four crews on the first shift, just 9% of the normal full complement of 44 crews
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