Quantcast

Gold Nears 19-Month Low: 5 Worst Stocks YTD


Shutterstock photo

After a blockbuster start to the year, gold has fallen out of investors' favor, thanks to rising interest rates and a strong dollar. The yellow metal logged in the sixth consecutive weekly decline and the worst weekly drop since December, shedding 2.2% last week. This followed the metal's fourth consecutive monthly decline in July that represents the longest stretch of losses since 2013.

Notably, the bullion remained near 19-month lows and has tumbled 14% since its peak in April.

Inside the Decline

The slew of upbeat data has been raising confidence in the U.S. economy, bolstering the case for interest rate hikes. The Fed has raised interest rates twice this year in quarter-point increments and is expected to implement two more lift-offs by the end of the year. Higher rates have diminished the yellow metal's attractiveness since it does not pay interest like fixed-income assets. Additionally, it has also provided a boost to the U.S. dollar.

America is expanding at a faster pace buoyed by historic tax cuts, infrastructure investment, higher government spending, deregulation, rising wages and record unemployment. The economy expanded 4.1% annually in the second quarter, representing the fastest pace of growth in nearly four years. Per Trump, "the United States is on track to hit the highest annual growth rate in over 13 years." A healthy economy is expected to pull in more capital into the country and lead to appreciation of the U.S. dollar.

Gold is generally viewed as a safe haven in times of economic or political turmoil. But the bullion recently lost its appeal as a safe-haven despite trade disputes and Turkish currency crisis since investors are looking at the dollar as a new safety investment in a strong economy. Additionally, rising equities tend to indicate investor appetite for riskier assets as opposed to traditional safe havens like gold.

Further, waning demand from the top two consumers, India and China, are also dampening the appeal for the metal. Fresh buying of gold has reduced, resulting in lower physical demand. While demand will likely remain subdued in China, given the trade dispute between the world's two largest economies, India is seeing a pickup in consumption of the metal going into the wedding season and festive months ahead. According to the World Gold Council (WGC), demand will likely be healthy in the second half of the year on positive but uneven global economic growth, trade war and its impact on currency, rising inflation and an inverted yield curve.

Moreover, investors have been building bearish bets on the bullion. Per the latest Commodity Futures Trading Commission data, large precious metals speculators sharply cut back on their net positions in the gold futures markets last week to a new bearish level since Aug 13, 2002.

Added to the gloomy sentiment, the gold mining industry has a dismal Zacks Rank in the bottom 16% , indicating more pain for at least in the near term.

That said, a number of stocks have been crushed, piling up heavy losses so far this year. Below, we have highlighted five such stocks that have been hit badly in the gold rout and might continue their rough trading in the months ahead if similar trends prevail.

Timmons Gold Corp ALO - Down 78.6%

This gold mining company is engaged in exploration, development and production primarily in Mexico. The stock saw negative earnings estimate revision of 16 cents for this year over the past 90 days and is expected to generate earnings decline of 50%. It has a Zacks Rank #4 (Sell) and a VGM Score of C.



Northern Dynasty Minerals Ltd. NAK - Down 71.8%

It acquires, explores for, and develops mineral properties in the United States. The Zacks Consensus Estimate has been revised up from a loss of 18 cents to a loss of 3 cents over the past 90 days for this year. The company has an expected earnings growth of 82.3% for this year. It has a Zacks Rank #2 (Buy) and a VGM Score of F. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here .



New Gold Inc. NGD - Down 69.8%

This intermediate gold mining company engaged in the development and operation of mineral properties. It primarily explores for gold, silver, and copper deposits. It saw negative earnings estimate revision of 12 cents for this year over the past 90 days and is expected to witness earnings decline of 150%. The stock has a Zacks Rank #5 (Strong Sell) and a VGM Score of D.



Sibanye Gold Limited SBGL - Down 56.8%

This company operates as a precious metals mining company in South Africa, Zimbabwe and the United States. It has seen negative earnings estimate revision of couple of cents for this year over the past 90 days. SBGL nevertheless is expected to register earnings growth of 175.00%. The stock has a Zacks Rank #4 and a VGM Score of B.



Pershing Gold Corporation PGLC - Down 54.2%

This company is engaged in the exploration and development of gold and precious metal properties primarily in Nevada. The company saw no earnings revision for this year over the past 90 days and is expected to post earnings growth of 12%. The stock carries a Zacks Rank #4 and a VGM Score of F.



Looking for Stocks with Skyrocketing Upside?

Zacks has just released a Special Report on the booming investment opportunities of legal marijuana. Ignited by new referendums and legislation, this industry is expected to blast from an already robust $6.7 billion to $20.2 billion in 2021. Early investors stand to make a killing, but you have to be ready to act and know just where to look.

See the pot trades we're targeting>>


Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

Pershing Gold Corporation (PGLC): Free Stock Analysis Report

Sibanye Gold Limited (SBGL): Free Stock Analysis Report

Northern Dynasty Minerals, Ltd. (NAK): Free Stock Analysis Report

New Gold Inc. (NGD): Free Stock Analysis Report

Timmons Gold Corp (ALO): Free Stock Analysis Report

To read this article on Zacks.com click here.

Zacks Investment Research

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.



This article appears in: Investing , Business , Stocks
Referenced Symbols: PGLC , SBGL , NAK , NGD , ALO



More from Zacks.com

Subscribe






Zacks.com
Contributor:

Zacks.com

Equity Research










Research Brokers before you trade

Want to trade FX?