The yellow metal has witnessed strong demand this year, owing to a string of factors that pushed gold prices this week to its highest in nearly nine years. This bullishness could be instrumental in pushing prices of the precious metal further in the months ahead. In fact, historically, the last time prices of the yellow metal were this high was in 2011, when it touched $1,921.
This is why now would be the ideal time to consider some stocks that are engaged in activities related to the yellow metal for investment, given the possibility that gold prices could stick to the road north.
Spot Gold Touches Almost 9-Year High
On Jul 21, spot gold increased 0.8% at $1,856.13 per ounce, after hitting its highest since September 2011 at $1,865.35 earlier during the session. U.S. gold futures climbed 0.7% to reach $1,856.80 on Tuesday.
After all, the near-zero federal funds rates, tensions hovering over an economic recovery and expectations of more stimulus to revitalize pandemic-hit economies as the number of new infections multiply in the United States and abroad are clearly pushing investors to seek safe havens in precious metal investments.
Factors Playing in Favor of Gold Prices
The first prominent reason behind high prices of gold is the low-interest rate environment in the country. In June, the Federal Reserve decided to keep the benchmark rates unchanged (as decided by the central bank in mid-March) to put the U.S. economy back on track. The rates, which are currently in the range of 0% to 0.25%, are expected to stay at this level for the next two and a half years.
Second, the United States leads the number of coronavirus pandemic deaths and new cases worldwide, as the country struggles to get a grip on the highly infectious disease. In fact, many states have re-imposed restrictions on public movement to slow down contamination. Even then, the number of new coronavirus cases reported everyday continues to rise.
Third, the recently agreed upon $2.1 trillion budget and rescue-fund package of the European Union is also bound to fuel gold prices ahead. The monetary stimulus is aimed at reviving the worst-hit economies because of the pandemic. Of course, the promise of additional U.S. fiscal stimulus could also support gold prices. Monetary stimulus could boost inflation, which could give in to a weaker dollar ahead.
As the value of dollar declines, it makes the yellow metal priced in the greenback cheaper for users of other currencies. And with more demand, the price of gold increased.
Investors are currently awaiting developments on another fiscal stimulus plan by the Congress as a $600 per-week federal unemployment package is about to expire by July-end.
4 Stocks to Buy
We have, therefore, chosen four stocks from the Zacks Mining – Goldindustry. All these stocks carry a Zacks Rank #1 (Strong Buy) or 2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Galiano Gold Inc. GAU engages in the exploration, development and production of gold properties. Galiano Gold has an expected earnings growth rate of more than 100% for the current year. The Zacks Consensus Estimate for the company’s current-year earnings has moved 62.5% north in the past 60 days. The stock carries a Zacks Rank #1.
Royal Gold, Inc. RGLD is an acquirer and manager of precious metal streams, royalties and related interests. Royal Gold has an expected earnings growth rate of 62.1% for the current year. The Zacks Consensus Estimate for the company’s current-year earnings has moved 0.9% north in the past 90 days. The stock carries a Zacks Rank #1.
Agnico Eagle Mines Limited AEM engages in the exploration, development and production of mineral properties. Agnico Eagle Mines has an expected earnings growth rate of 73.2% for the current year. The Zacks Consensus Estimate for the company’s current-year earnings has moved 12% north in the past 60 days. The stock carries a Zacks Rank #2.
Harmony Gold Mining Company Limited HMY engages in the exploration, extraction and processing of gold. Harmony Gold Mining Company has an expected earnings growth rate of more than 100% for the current year. The Zacks Consensus Estimate for the company’s current-year earnings has moved 15.9% north in the past 60 days. The stock carries a Zacks Rank #2.
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