On Jul 24, gold price sprinted to a nine-year high as the coronavirus pandemic worsened and new data showed weaker-than-expected recovery of the global economy. As investors went into an overdrive, scurrying for safe-haven assets to counter economic uncertainty, gold price broke past the $1,900 mark.
The yellow metal also got a boost from escalating geopolitical tensions over the past three months that have been denting the confidence of risk-on investors.
Gold Price Nearing All-Time High
The price of the precious metal has been hovering around $1,850 for the past few days. On Jul 24, it finally crossed the psychological mark of $1,900, only for the second time in history.
Gold price had hit a record high of $1,920.70 in 2011, according to Comex futures, and it won’t come as a surprise if that mark is breached in the coming days. Aside from the coronavirus-related uncertainly and geopolitical agitation, the other factor that pushed the price of the yellow metal was the manufacturing and services PMI report, which missed forecast, raising further concerns over the strength of the economy.
Fear Grips Markets
Gold has gained around 20% so far this year and is at its highest levels in almost a decade, making it one of the best-performing major asset classes of 2020. The surge is primarily due to investors’ search for safe-haven assets.
Notably, gold’s dream run follows an impressive 2019, wherein it gained about 19%, its strongest annual increase since 2010. A weaker U.S. dollar index, technical buying, and increasing consumer demand from China and India have been fueling the bull run of the yellow metal. However, gold price had taken a hit in March as investors sold everything and piled into cash.
Things changed following the coronavirus outbreak as governments across the world unleashed unprecedented fiscal and monetary stimulus and yields started plunging. The ultra-easy monetary policy is another reason for the surging price of gold. The Fed has been acting super-dovish since March. It has cut rates to zero and launched an infinite QE policy. The Fed is also buying highly rated corporate debt as well as fallen angles. Such measures have kept the dollar’s strength in check.
Moreover, real U.S. treasury yields presently are negative from a five-year to 20-year term. This lowers the opportunity cost of holding a non-interest-bearing asset like bullion. The precious metal is also getting a boost from uncertainty around the U.S. presidential election and rising geopolitical conflict around the world that are making investors skeptical and making them go for safe-haven assets.
Our Choices
We thus believe that this is a good time for investors to add some gold stocks to their portfolio. We suggest five top-ranked gold stocks which have potential to outperform the broader market.
Equinox Gold Corp. EQX engages in the acquisition, exploration and development of mineral deposits. It primarily explores for gold, copper and silver deposits. The company’s principal properties include the Aurizona gold mine in Maranhão State Brazil and the Mesquite gold mine in California.
The company’s expected earnings growth rate for the current year is more than 100%. The Zacks Consensus Estimate for current-year earnings has improved 62.5% over the past 60 days. Equinox Goldsports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Harmony Gold Mining Company Limited HMY is based in Randfontein, South Africa. The company conducts underground and surface gold mining. It is also engaged in related activities such as exploration, processing, smelting and refining.
The company’s expected earnings growth rate for the current year is more than 100%. The Zacks Consensus Estimate for current-year earnings has improved 15.9.6% over the past 60 days. Harmony Gold Mining has a Zacks Rank #2 (Buy).
Asanko Gold Inc. GAU principally explores and develops gold fields. The company currently operates and manages the Asanko Gold Mine, located in Ghana, West Africa which is jointly owned with Gold Fields Ltd.
The company’s expected earnings growth rate for the current year is more than 100%. The Zacks Consensus Estimate for current-year earnings has improved 114.6% over the past 60 days. The company has a Zacks Rank #2.
Gold Fields Limited GFI is one of the world’s largest unhedged gold producers with operating mines in South Africa, Ghana and Australia.
The company’s expected earnings growth rate for the current year is 35.7%. The Zacks Consensus Estimate for current-year earnings has improved 3.6% over the past 60 days. Gold Fieldscarries a Zacks Rank #2.
Eldorado Gold Corporation EGO and its subsidiaries engage in the exploration, discovery, acquisition, financing, development, production, sale and reclamation of mineral products, primarily in Turkey, Canada, Greece, Brazil and Romania. The company primarily produces gold as well as silver, lead, zinc, and iron ore.
The company’s expected earnings growth rate for the current year is 58%. The Zacks Consensus Estimate for current-year earnings has improved 13.3% over the past 60 days. Eldorado Goldhas a Zacks Rank #2.
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