Gold had a solid run overall in 2020, registering growth of 24.6% — the highest annual gain since 2010 — primarily riding on the global uncertainty stemming from the COVID-19 pandemic. Also, the ultra-low interest rate environment drove investors to safe-haven assets. Fears of a supply crunch with miners halting their operations as per government mandates in the earlier part of the year also contributed to the price movement. Gold even shot past the $2,000 an ounce threshold for the first time in August 2020.
However, gold prices lost momentum during fourth-quarter 2020 as improving prospects for the global economy dulled the sheen of gold. Prices dipped to $1,767 per ounce at November end but picked up soon to close the quarter at around $1,895 per ounce. Nevertheless, average gold prices in fourth-quarter 2020 were around $1,878 an ounce, higher than $1,513 an ounce in fourth-quarter 2019.
The conclusion of the widely anticipated US election eliminated a key element of uncertainty, which otherwise was working in favor of gold. Also, the rollout of vaccines uplifted market sentiment, thereby, prompting investors to shift to riskier assets like stocks. Gold ETFs witnessed net outflows of 130 tons over the fourth quarter. Even though the quarter started positively with inflows of 18.8 tons in October, November witnessed net outflows of 108.7 tons due to drop in gold prices. December witnessed net outflows of 40.1 tons.
Gold demand in the fourth quarter plunged 28% to 783.4 tons — the weakest quarterly performance since the Global Financial Crisis. Jewelry demand fell 13% year-over-year to 515.9 tons. While jewelry demand was weak in China, India saw an improvement in the quarter aided by reopening of the economy, announcement of vaccines and pent-up demand from festivals and weddings during the fourth quarter. Further rural demand was higher, aided by a good monsoon.
Mine production in the final quarter of 2020 was down 3% to 896.3 tons from the prior-year quarter. This was the lowest level of fourth quarter mine output since 2015 and also marked the seventh successive quarter of year-over-year declines. Apart from interruptions related to COVID-19 pandemic, other factors hurt mine output as well. This includes cessation of operations at the Porgera operation in Papua New Guinea following the government’s decision to not renew the mining lease, lower production in Australia due to falling grades at several large producers and lower Chinese output on account of continued implementation of rigorous environmental standards.
Amid the uncertainty, gold miners have been focusing efforts on operating efficiently, cutting down costs to maintain margins and lowering debt levels.
Q4 Expectations
Per the Zacks classification, the Mining - Gold industry comes under the broader Basic Materials sector. Per the latest Earnings Trends report, the sector’s earnings are expected to improve 23%, while revenues are projected to be up 1.4%. This is a major recovery from a decline of 11.5% suffered in earnings on the back of an 8.2% drop in revenues in the third quarter. This comeback can primarily be attributed to demand recovery in China and rising commodity prices through the quarter. In fact, the sector is one of the nine sectors that are expected to witness earnings growth in the positive territory this earnings season.
Picking Up Winners From the Gold Mining Space
It is wise to select gold stocks that are well-poised to beat earnings in their upcoming releases. Nonetheless, given the wide range of companies in this space, the task is by no means easy. One way to do it is by picking stocks, which have the combination of a Zacks Rank — #1 (Strong Buy), 2 (Buy) or 3 (Hold) — and a positive Earnings ESP.
You can the complete list of today’s Zacks #1 Rank stocks here.
Earnings ESP — the percentage difference between the Most Accurate Estimate and the Zacks Consensus Estimate — is our proprietary methodology for determining stocks that have high chances of delivering earnings surprises in their next announcements. Our research shows that for stocks with this combination, the chance of an earnings surprise is as much as 70%.
You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
With the Zacks Stock Screener, three such gold stocks have been identified.
Our Picks
Franco-Nevada Corporation (FNV - Free Report) has an Earnings ESP of +0.36% and a Zacks Rank #3. The company has a trailing four quarter earnings surprise of 16.5%, on average.
Higher gold prices and focus on cost management might have benefited the company’s performance in the quarter to be reported. However, weak performance of its energy assets might get reflected in the fourth-quarter results. The Zacks Consensus Estimate for fourth-quarter earnings is pegged at 70 cents, indicating an improvement of 18.4% from the year-ago quarter. The estimate has moved down 2.7% over the past 30 days. It is anticipated to report fourth-quarter 2020 earnings around Mar 8.
New Gold Inc. (NGD - Free Report) has an Earnings ESP of +23.08% and a Zacks Rank #2. The company has a trailing four-quarter earnings surprise of 16.7%, on average.
The company’s to-be-reported quarter’s performance might have benefited from its ongoing efforts to improve its operational and cost performance. Higher gold prices and increased gold production at its Rainy River and New Afton Mines is likely to get reflected in the top line. The Zacks Consensus Estimate for fourth-quarter 2020 earnings is pegged at 3 cents, suggesting improvement of 175% from the prior-year quarter. The estimate has moved up 62.5% over the past 30 days. It is slated to release fourth quarter 2020 earnings on Feb 19.
Osisko Gold Royalties Ltd (OR - Free Report) has an Earnings ESP of +6.67% and a Zacks Rank #3. The company has a trailing four-quarter earnings surprise of 8.3%, on average.
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Zacks Names "Single Best Pick to Double"
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It’s a little-known chemical company that’s up 65% over last year, yet still dirt cheap. With unrelenting demand, soaring 2022 earnings estimates, and $1.5 billion for repurchasing shares, retail investors could jump in at any time.
This company could rival or surpass other recent Zacks’ Stocks Set to Double like Boston Beer Company which shot up +143.0% in little more than 9 months and NVIDIA which boomed +175.9% in one year.
Free: See Our Top Stock and 4 Runners Up >>
Gold had a solid run overall in 2020, registering growth of 24.6% — the highest annual gain since 2010 — primarily riding on the global uncertainty stemming from the COVID-19 pandemic. Also, the ultra-low interest rate environment drove investors to safe-haven assets. Fears of a supply crunch with miners halting their operations as per government mandates in the earlier part of the year also contributed to the price movement. Gold even shot past the $2,000 an ounce threshold for the first time in August 2020.
However, gold prices lost momentum during fourth-quarter 2020 as improving prospects for the global economy dulled the sheen of gold. Prices dipped to $1,767 per ounce at November end but picked up soon to close the quarter at around $1,895 per ounce. Nevertheless, average gold prices in fourth-quarter 2020 were around $1,878 an ounce, higher than $1,513 an ounce in fourth-quarter 2019.
The conclusion of the widely anticipated US election eliminated a key element of uncertainty, which otherwise was working in favor of gold. Also, the rollout of vaccines uplifted market sentiment, thereby, prompting investors to shift to riskier assets like stocks. Gold ETFs witnessed net outflows of 130 tons over the fourth quarter. Even though the quarter started positively with inflows of 18.8 tons in October, November witnessed net outflows of 108.7 tons due to drop in gold prices. December witnessed net outflows of 40.1 tons.
Gold demand in the fourth quarter plunged 28% to 783.4 tons — the weakest quarterly performance since the Global Financial Crisis. Jewelry demand fell 13% year-over-year to 515.9 tons. While jewelry demand was weak in China, India saw an improvement in the quarter aided by reopening of the economy, announcement of vaccines and pent-up demand from festivals and weddings during the fourth quarter. Further rural demand was higher, aided by a good monsoon.
Mine production in the final quarter of 2020 was down 3% to 896.3 tons from the prior-year quarter. This was the lowest level of fourth quarter mine output since 2015 and also marked the seventh successive quarter of year-over-year declines. Apart from interruptions related to COVID-19 pandemic, other factors hurt mine output as well. This includes cessation of operations at the Porgera operation in Papua New Guinea following the government’s decision to not renew the mining lease, lower production in Australia due to falling grades at several large producers and lower Chinese output on account of continued implementation of rigorous environmental standards.
Amid the uncertainty, gold miners have been focusing efforts on operating efficiently, cutting down costs to maintain margins and lowering debt levels.
Q4 Expectations
Per the Zacks classification, the Mining - Gold industry comes under the broader Basic Materials sector. Per the latest Earnings Trends report, the sector’s earnings are expected to improve 23%, while revenues are projected to be up 1.4%. This is a major recovery from a decline of 11.5% suffered in earnings on the back of an 8.2% drop in revenues in the third quarter. This comeback can primarily be attributed to demand recovery in China and rising commodity prices through the quarter. In fact, the sector is one of the nine sectors that are expected to witness earnings growth in the positive territory this earnings season.
Picking Up Winners From the Gold Mining Space
It is wise to select gold stocks that are well-poised to beat earnings in their upcoming releases. Nonetheless, given the wide range of companies in this space, the task is by no means easy. One way to do it is by picking stocks, which have the combination of a Zacks Rank — #1 (Strong Buy), 2 (Buy) or 3 (Hold) — and a positive Earnings ESP.
You can the complete list of today’s Zacks #1 Rank stocks here.
Earnings ESP — the percentage difference between the Most Accurate Estimate and the Zacks Consensus Estimate — is our proprietary methodology for determining stocks that have high chances of delivering earnings surprises in their next announcements. Our research shows that for stocks with this combination, the chance of an earnings surprise is as much as 70%.
You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
With the Zacks Stock Screener, three such gold stocks have been identified.
Our Picks
Franco-Nevada Corporation (FNV - Free Report) has an Earnings ESP of +0.36% and a Zacks Rank #3. The company has a trailing four quarter earnings surprise of 16.5%, on average.
Higher gold prices and focus on cost management might have benefited the company’s performance in the quarter to be reported. However, weak performance of its energy assets might get reflected in the fourth-quarter results. The Zacks Consensus Estimate for fourth-quarter earnings is pegged at 70 cents, indicating an improvement of 18.4% from the year-ago quarter. The estimate has moved down 2.7% over the past 30 days. It is anticipated to report fourth-quarter 2020 earnings around Mar 8.
New Gold Inc. (NGD - Free Report) has an Earnings ESP of +23.08% and a Zacks Rank #2. The company has a trailing four-quarter earnings surprise of 16.7%, on average.
The company’s to-be-reported quarter’s performance might have benefited from its ongoing efforts to improve its operational and cost performance. Higher gold prices and increased gold production at its Rainy River and New Afton Mines is likely to get reflected in the top line. The Zacks Consensus Estimate for fourth-quarter 2020 earnings is pegged at 3 cents, suggesting improvement of 175% from the prior-year quarter. The estimate has moved up 62.5% over the past 30 days. It is slated to release fourth quarter 2020 earnings on Feb 19.
Osisko Gold Royalties Ltd (OR - Free Report) has an Earnings ESP of +6.67% and a Zacks Rank #3. The company has a trailing four-quarter earnings surprise of 8.3%, on average.
Just Released: Zacks’ 7 Best Stocks for Today
Experts extracted 7 stocks from the list of 220 Zacks Rank #1 Strong Buys that has beaten the market more than 2X over with a stunning average gain of +24.9% per year.
These 7 were selected because of their superior potential for immediate breakout.
See these time-sensitive tickers now >>
Zacks Names "Single Best Pick to Double"
From thousands of stocks, 5 Zacks experts each have chosen their favorite to skyrocket +100% or more in months to come. From those 5, Director of Research Sheraz Mian hand-picks one to have the most explosive upside of all.
It’s a little-known chemical company that’s up 65% over last year, yet still dirt cheap. With unrelenting demand, soaring 2022 earnings estimates, and $1.5 billion for repurchasing shares, retail investors could jump in at any time.
This company could rival or surpass other recent Zacks’ Stocks Set to Double like Boston Beer Company which shot up +143.0% in little more than 9 months and NVIDIA which boomed +175.9% in one year.
Free: See Our Top Stock and 4 Runners Up >>
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