Stocks

5 Gold Stocks to Keep an Eye on as Gold Prices Stabilize

Gold futures for June delivery gained 0.8% to close at $1,741.50 an ounce on Apr 6 courtesy of a weaker dollar and as yield on the benchmark 10-year Treasury note declined to 1.64% — the lowest in two weeks, with global stocks trading around all-time highs. The yellow metal seems to have regained footing after losing 8% of its value so far this year due to vaccine rollouts and strong optimism over economic recovery.

According to the latest Labor Department report, total nonfarm payroll employment rose by 916,000 in March and the unemployment rate fell to 6.0%, reflecting the resumption of economic activity that had been thwarted by the pandemic. In the United States, there has been a noted expansion in manufacturing activity over the past 10 months. The Caixin China General Manufacturing PMI has remained above 50 since May last year, highlighting expansion. Meanwhile, the IHS Markit Eurozone Manufacturing PMI has also trended above 50 since July last year. The IHS Markit US Services PMI came in at 60.4 in March 2021, higher than 59.8 in February — the fastest output growth since July 2014. All these have fueled hopes for a rapid economic recovery and bolstered global equities, which dulled gold’s luster.

Going forward, major markets namely, India and China (that roughly account for around 50% of consumer gold demand), will sustain demand for the yellow metal. The ongoing economic recovery in China will lead to higher demand for the yellow metal. Also, India remarkably received healthy monsoon rainfall for the second straight year. Around 60% of the gold demand in the country is tied to the rural populace, which depends on monsoon. This could help counter the negative impact of COVID-19 in rural areas.

Per reports, India's gold imports in March surged 471% year over year to a record 160 tons as a reduction in import taxes and a dip in prices from record highs led to higher retain buying. Also, it is worth mentioning that gold demand in India has been high in the later part 2020, courtesy of the wedding and festive seasons when buying the yellow metal is considered auspicious. Central banks also continue to buy gold. Thus, demand for gold is likely to improve this year.

Mine production is expected to recover this year following the pandemic induced shutdowns in the earlier part of last year. Although pandemic-related uncertainty still lingers in 2021, production is unlikely to be impacted again as major companies have introduced protocols and procedures that should reduce the impact of stoppages compared to those seen in the early stages of the pandemic.



Due to lower gold prices, the Zacks Gold Mining industry has declined 5.5% year to date against the S&P 500’s growth of 9.0%. The industry falls under the broader Basic Materials sector that gained 12.9%.

The gold mining industry currently carries a Zacks Industry Rank #221, which places it at the bottom 13% of 256 Zacks industries. Our research shows that the top 50% of the Zacks-ranked industries outperforms the bottom 50% by a factor of more than 2 to 1.

Per the latest Earnings Trends, after remaining in the red for the past four quarters, the Basic Materials sector returned to growth with an earnings improvement of 28.1% in fourth-quarter 2020. The sector is expected to witness growth of 66.4% in earnings in first-quarter 2020, followed by 162.2%, 48.8% and 11.8% in the second, third and fourth quarters, respectively. The prospects for 2021 look promising for the sector with an impressive earnings growth projection of 58.4%.

We have handpicked five gold stocks that one can buy given their alluring prospects. All the five stocks have a Zacks Rank # 3 (Hold) and a VGM Score of A or B. Our research shows that stocks with such a combination offer the best investment opportunities. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Barrick Gold Corp GOLD: Headquartered in Toronto, Canada, Barrick Gold engages in the exploration, mine development, production, and sale of gold and copper properties.

The company is expected to gain from progress of its key growth projects that are likely to contribute to its production. Barrick Gold has a strong liquidity position and generates healthy cash flows, which positions it well to take advantage of attractive development, exploration and acquisition opportunities. The company should gain from its merger with Randgold, which formed an industry-leading gold company and fortified its position among senior gold peers. Further, it is close to finalizing an agreement with the Papua New Guinea government to reopen the Porgera gold mine. Porgera churned out about 600,000 ounces of gold in 2019 before being put on care and maintenance.

The company has a long-term estimated earnings growth rate of 2%. The Zacks Consensus Estimate for the company’s fiscal 2021 earnings suggests year-over-year growth of 13%. The estimate has been revised upward by 19% over the past 90 days. The stock has a Zacks Rank #3 and a VGM Score of A. Its shares have gained 3% in the past year. The company has a trailing four-quarter earnings surprise of 15.5%, on average.

Agnico Eagle Mines Limited AEM: Headquartered in Toronto, Canada, Agnico Eagle Mines engages in exploration, development, and production of mineral properties in Canada, Sweden, and Finland.

The company has increased its exploration budget and is reinvesting in assets to expand output. It is expected to gain from the Kittila mine in Finland — the largest primary gold producer in Europe. The Kittila expansion is expected to enhance mine efficiency and lower current operating costs. Further, it is anticipated to gain from the Hope Bay acquisition and the Hammond Reef project. Agnico Eagle Mines also has access to Meliadine and Canadian Malartic, major contributors to its quarterly production. Moreover, it is committed to boosting shareholder's return, while maintaining healthy cash flows and lowering debt levels.

The Zacks Consensus Estimate for fiscal 2021 earnings indicates year-over-year improvement of 77.8%. Shares of the company have gained 32% over the past year. It has a Zacks Rank #3 and a VGM Score of B. The company has long-term estimated earnings growth rate of 1%. The company has a trailing four-quarter earnings surprise of 12.1%, on average.

Kinross Gold Corporation KGC:  Domiciled in Toronto, Canada, Kinross Gold, together with its subsidiaries, engages in the acquisition, exploration, and development of gold properties principally in the United States, the Russian Federation, Brazil, Chile, Ghana, and Mauritania.

The company is making steady progress in advancing the projects that will provide it strong growth profile among leading gold producers. Tasiast is an operating mine and further expansion of the project will boost productivity. It attained record production and costs in full-year 2020. Moreover, the capital efficient Tasiast 24k project provides another upside. Kinross Gold is also likely to gain from organic development projects and opportunities in the Americas. The Gilmore project is a low-cost brownfield expansion with minimal risk.

The Zacks Consensus Estimate for the company’s ongoing-year earnings suggests year-over-year growth of 1%. The company has a trailing four-quarter earnings surprise of 18.5%, on average. The stock has a Zacks Rank #3 and a VGM Score of A. In the past year, the stock has appreciated 42%.

Yamana Gold Inc. AUY: This Toronto, Canada based precious metals producer has significant gold and silver production, development stage properties, exploration properties, and land positions throughout the Americas, including Canada, Brazil, Chile, and Argentina.

The company plans to continue to build on this base through expansion and optimization initiatives at existing operating mines, development of new mines, advancement of its exploration properties, and looking for other consolidation opportunities with a primary focus in the Americas. By prudently investing in its exploration project pipeline, the company anticipates to steadily increase its mineral resource base and generate consistent long-term growth in production and cash flow. The company has significantly improved its balance sheet and financial flexibility, and lowered debt levels.

The Zacks Consensus Estimate for the company’s 2021 earnings indicates year-over-year improvement of 11.9%. The company has a trailing four-quarter earnings surprise of 62%, on average. The company has a long-term estimated earnings growth rate of 41.7%. Shares of the company, which has a Zacks Rank #3 and a VGM Score of B, have gained 36% over the past year.

Harmony Gold Mining Company Limited HMY: Headquartered in Randfontein, South Africa, Harmony Gold Mining engages in the exploration, extraction, and processing of gold in South Africa and Papua New Guinea.

Harmony Gold Mining is benefiting from a diverse portfolio of gold development projects. The company’s development projects currently in progress includes the development of the Wafi-Golpu, a copper/gold deposit in Papua New Guinea, which received the environment permit in late 2020 and is expected to increase production. The Golpu project is believed to be a game changer for the company. According to the company, Golpu is a promising orebody that contains mineral resources of 20 million ounces of gold and 9.4 million tons of copper. The company's efforts to reduce its debt levels remain commendable.

The Zacks Consensus Estimate for the company’s fiscal 2021 earnings is currently pegged at 69 cents, indicating a turnaround from a loss of 10 cents reported in the prior fiscal. The company has an estimated long-term earnings growth of 7.9%. The company currently has a Zacks Rank #3 and a VGM Score of B.

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Barrick Gold Corporation (GOLD): Free Stock Analysis Report
 
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Yamana Gold Inc. (AUY): Free Stock Analysis Report
 
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