Gold has gained 28% so far this year, and has significantly outperformed all major assets. This rally has been fueled primarily by the high level of uncertainty stemming from the COVID-19 pandemic and the ultra-low interest rate environment that drove investors to safe-haven assets. Notably, gold’s dream run so far comes on the back of an impressive 2019, wherein it gained about 19% — the highest annual gain since 2010.
Gold prices had breached the $2,000 mark in late-July and eventually touched an all-time high of $2,089.20 on Aug 7. Gold futures for December delivery settled at $1,954.90 an ounce on Sep 9, gaining 0.60% a day, triggered by apprehensions regarding a delay in the development of a COVID-19 vaccine. AstraZeneca announced that it has paused global trials of the Oxford vaccine due to an unexplained illness in a study participant. This delay works in favor of gold as it could lead to a prolonged economic slowdown.
Investors’ appetite for the precious metal amid the COVID-19 crisis remains high. Global gold-backed exchange-traded funds (ETF) reported inflows for nine consecutive months in August with year-to-date inflows of 938 tons or $51.2 billion, per the World Gold Council. This takes total gold ETF holdings to a new record high of 3,824 tons. This can primarily be attributed to the coronavirus pandemic and global uncertainty, and the resulting financial-market volatility owing to the same. The performance trumps both the previous highs of annual inflow in tonnage terms (646 tons attained in 2009) and dollar value terms ($23 billion in 2016).
The pandemic has impacted gold production as miners had to suspend operations in accordance to government mandates. Per the last available data from the World Gold Council, gold production in the first half of 2020 declined 5% year over year — the lowest first half level since 2014. Consequently, an impending demand-supply imbalance bodes well for gold prices.
The uncertainty regarding virus' impact on the global economy and the governments’ stimulus measures are likely to sustain gold prices, until the situation stabilizes. The International Monetary Fund’s (IMF) latest forecast anticipates the world economy to contract by 4.9% this year. Gold will continue to be the preferred investment option courtesy of the low interest-rate environment, the pandemic-induced global slowdown and political uncertainties. Further, uncertainty over the upcoming U.S election will boost safe haven demand for the yellow metal.
On the back of the gold-price rally, the Gold Mining industry has rallied 50.3% year to date, outperforming the S&P 500’s growth of 5.7%. The industry falls under the broader Basic Material sector, which gained 2.5%.
The gold mining industry currently carries a Zacks Industry Rank #61, which places it at the top 24% 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.
We, thus, believe the time is right for investors to add some gold stocks to their portfolio. We have employed the Zacks Screener to pick five top-ranked gold stocks. Our research shows that stocks with the combination of a VGM Score of A or B and a Zacks Rank #1 (Strong Buy) or 2 (Buy) offer good investment opportunities.
You can see the complete list of today’s Zacks #1 Rank stocks here.
5 Promising Stocks
AngloGold Ashanti Limited (AU - Free Report) : Based in Johannesburg, South Africa, the company currently has a Zacks Rank #1 and a VGM Score of A. The company has a long-term estimated earnings growth rate of 25.6%. The Zacks Consensus Estimate for 2020 earnings indicates year-over-year improvement of 124%. The estimates have been revised upward by 7% over the past 60 days. The stock has gained 31.5% so far this year.
Pretium Resources Inc. (PVG - Free Report) : This Vancouver, Canada based company has a Zacks Rank #2 currently and a VGM Score of B. The Zacks Consensus Estimate for the current fiscal-year earnings suggests year-over-year growth of 20%. The company has a trailing four-quarter earnings surprise of 31.7%, on average. The stock has appreciated 20% year to date.
Kinross Gold Corporation (KGC - Free Report) : Based in Toronto, Canada, the company presently has a Zacks Rank #2 and a VGM Score of B. The Zacks Consensus Estimate for current-year earnings indicates year-over-year improvement of 100%. The estimates have gone up 28% over the past 60 days. The company has a trailing four-quarter earnings surprise of 15.5%, on average. The stock has gained 93.4% so far this year.
Eldorado Gold Corporation (EGO - Free Report) : This Vancouver, Canada based company has a Zacks Rank #2 and a VGM Score of A. The Zacks Consensus Estimate for fiscal 2020 earnings indicates year-over-year growth of 2325%. The estimates have been revised upward by 26% over the past 60 days. The stock has appreciated 37% year to date
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