Gold prices once again soared on Aug 6, settling well above $2,000 and inching toward a new high. Investors, over the past few months, have gone into an overdrive, scurrying for safe-haven assets to brace against the uncertainty around global economy that has seen gold price break past the $2,000 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
Gold prices have been hovering around the 1,850 mark for quite some time till it crossed the psychological mark of $1,900, only for the second time in history last month. Since then, the precious metal’s price has only soared, ending above $2,000 for the first time on Aug 5.
Gold price had hit a record high of $1,920.70 in 2011, according to Comex futures, but that seems too paltry in comparison to the new high. And it won’t be wrong to say that the prices will only escalate from here given that investor confidence has hit rock bottom, making them rush for safe-haven stocks. Besides the coronavirus-related uncertainly, growing geopolitical tensions have been aiding gold prices for the past few weeks.
Fear Grips Markets
Gold has gained over 20% 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 the uncertainty around the U.S. presidential election and rising geopolitical conflict around the world that are making investors skeptical and 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 the potential to outperform the broader market in the coming days.
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 expected earnings growth rate for the current year is more than 100%. The Zacks Consensus Estimate for current-year earnings has improved 115% over the past 60 days. Equinox Gold has a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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 more than 100%. The Zacks Consensus Estimate for current-year earnings has improved 14.7% over the past 30 days. Eldorado Gold has a Zacks Rank #2.
Barrick Gold Corporation GOLD is the largest gold mining company in the world. The company has many advanced exploration and development projects located across five continents.
The company’s expected earnings growth rate for the current year is 72.6%. The Zacks Consensus Estimate for current-year earnings has improved 11.4% over the past 30 days. Barrick Gold holds a Zacks Rank #2.
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 30.8% over the past 30 days. The company has a Zacks Rank #2.
Harmony Gold Mining Company Limited HMY conducts underground and surface gold mining. It is also engaged in related activities such as exploration, processing, smelting and refining. Harmony is the third largest producer of gold in South Africa and the 11th largest gold producer in the world.
The company’s expected earnings growth rate for the current year is more than 100%. Its shares have jumped 41.7% over the past 30 days. Harmony Gold Mining carries a Zacks Rank #2.
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