Markets

Gold Dips on Yellen's Hawkish Comments, Sell These 6 Stocks

On Thursday, at the University of Massachusetts, Federal Reserve (Fed) Chairwoman Janet Yellen remarked that she expects the US central bank to start raising rates later in 2015, as long as inflation remained stable and the US economy was strong enough to boost employment. Following this statement, gold fell from its one-month high on Friday, Sep 25. Spot gold closed at $1,146 per ounce on Friday, down 0.7% from the previous close, having climbed 2% on Thursday, its biggest one-day rise since January.

Hawkish comment from Yellen and the release of positive US data provided the dollar with renewed upside momentum. This in turn, led to the dip in gold prices , tarnishing its safe-haven demand. It is a well known fact that gold is negatively correlated to interest rates, as a rise tends to boost returns from income generating assets and thus hits non-yielding commodities.

Yellen's remarks came a week after the Fed's much anticipated September meeting. The Fed stayed put on its decision of not raising rates due to worries surrounding slowing global economic activity and excessively low inflation. Gold had rallied following the meeting, capitalizing on its safe haven status amid down equity markets and after weak US economic news.

However, the tables seem to have turned for gold. On the heels of Yellen's comment came a revised reading from the Commerce Department that the US economy grew at a rate of 3.9% in the second quarter, higher than its previous estimate of 3.7%. Compared with the paltry 0.6% pace in the first quarter, when an especially harsh winter hit economic activity, this figure depicts a strong recovery. These figures have reinforced expectations that the Federal Reserve will raise interest rates before the end of this year as the US economic picture seems stable enough to withstand a modest rate hike.

A stronger dollar and imminent rate hike will keep gold prices on check. However, on the positive side, strong physical buying in India going forward due to the festive and wedding season may support gold prices. Gold has entered a seasonally strong period and demand is expected to pick up with the Diwali festival in India, Thanksgiving and Christmas in the U.S. and the Chinese Lunar New Year coming up.

In line with the decline in gold prices, we suggest few underperforming gold mining stocks to steer clear from at the moment. We have screened mining stocks that have a Zacks Rank #4 (Sell) or 5 (Strong Sell) and have yielded negative returns year to date.

Randgold Resources LimitedGOLD

Based in St. Helier, the Channel Islands, Randgold Resources Limited explores and develops gold deposits in Sub-Saharan Africa.

The company's share price fell 1.99% on Friday., The stock has yielded a negative return of 11.6% year to date, and currently carries a Zacks Rank #5. The company has failed to match the Zacks Consensus Estimate in three of the last four quarters, averaging -13.36%. Moreover, the company's estimates have been revised downwards over the past 60 days. To top this, Randgold's fiscal 2015 earnings is projected to drop 21.20% year over year.

Sandstorm Gold Ltd.SAND

Headquartered in Vancouver, Canada, Sandstorm Gold, a resource-based company, focuses on acquiring gold and other precious metal purchase agreements and royalties from companies that have advanced stage development projects or operating mines.

Share price of this Zacks Rank #5 stock declined roughly 4.1% yesterday. It has yielded a negative return of 18.24% so far in calendar year 2015. The company has delivered an average negative earnings surprise of 316.67% in the past four quarters. Moreover, its estimates have been revised downwards over the past 60 days. Sandstorm Gold's fiscal 2015 earnings are projected to drop 156.25% year over year.

AngloGold Ashanti Ltd.AU

Headquartered in Johannesburg, South Africa, AngloGold Ashanti Limited operates as a gold mining and exploration company. It also produces silver, uranium oxide, copper, molybdenum, and sulphur. The company has 20 operations and exploration projects in South Africa, Continental Africa, Australasia, and the Americas.

The stock lost 3.82% of its value on Friday, yielding a negative year-to-date return of 7.36%. The stock currently has a Zacks Rank #4.

B2Gold Corp.BTG

Headquartered in Vancouver, Canada, B2Gold Corp., a mid-tier gold mining company, explores and develops mineral properties in Nicaragua, the Philippines, Namibia, Burkina Faso, and Chile. The company principally explores for gold, silver, and copper.

The company's share price fell 5.9% on Friday. Year to date, the firm has yielded a negative return of 31.48%, and currently carries a Zacks Rank #4. The company has missed the Zacks Consensus Estimate in 2 of the past 4 quarters, with an average negative earnings surprise of 150%.

Kinross Gold CorporationKGC

Based in Toronto, Canada, Kinross Gold Corporation, together with its subsidiaries, engages in the acquisition, exploration, and development of gold bearing properties. It is involved in mining and processing gold and silver ores. T

The stock has a negative year-to-date return of 40.43% and carries a Zacks Rank #4. The company's share price slid 1.75% on Friday. The company posted an average negative earnings surprise of 33.33% over the past 4 quarters. Moreover, its estimates have moved south over the past 60 days. The Zacks Consensus Estimate for the current fiscal is projecting a decline of 145.5%.

Timmins Gold Corp.TGD

Headquartered in Vancouver, Canada, Timmins Gold Corp., through its subsidiaries, engages in the acquisition, exploration, development, and operation of mineral resource properties in Mexico. It primarily explores for gold.

The stock has a negative year-to-date return of 73.75%. Shares of the company fell 4.25% on Friday. Its earnings estimates have moved south over the past 60 days. The Zacks Consensus Estimate for the current fiscal is projecting a decline of 114.3%.

Bottom Line

Exiting certain underperformers at the right time helps maximize portfolio returns. With gold prices being low at the moment, we believe it will be a prudent move to get rid of these stocks.

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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

KINROSS GOLD (KGC): Free Stock Analysis Report

ANGLOGOLD LTD (AU): Free Stock Analysis Report

RANDGOLD RSRCS (GOLD): Free Stock Analysis Report

SANDSTORM GOLD (SAND): Free Stock Analysis Report

TIMMINS GOLD (TGD): Free Stock Analysis Report

B2GOLD CORP (BTG): Free Stock Analysis Report

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


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

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