After an extended rally on U.S. Federal Reserve’s decision to keep interest rates on hold, gold lost some steam last week with prices slipping on Sep 30 to end the third quarter in the negative territory. A rally in U.S. equities (partly on the prospect of a Clinton presidency) and a firming U.S. dollar contributed to the yellow metal’s retreat.
Gold prices for December delivery on the Comex division of the New York Mercantile Exchange closed 0.7% lower at $1,317.10 a troy ounce last Friday. While gold ended lower for the third quarter (down roughly 0.3%), it still managed to rake in a 0.4% gain for September. Prices of the yellow metal fell around 1.8% last week. Notwithstanding the dip, gold prices are still up roughly 24% year to date.
Gold prices climbed to touch a two-week high on Sep 21 after the Fed left interest rates unchanged (in the band of 0.25%-0.50%) at its September meeting. The central bank kept benchmark interest rates steady as it wants to see further improvement in the labor market and more sign of strength in the economy. The Fed, however, signalled one hike by the end of the year.
The Fed, in its statement, noted a pickup in economic activity since a choppy first-half 2016 and strong growth in employment and household spending, but added that business fixed investment remains weak.
A low-rate environment augurs well for the yellow metal. A delay in raising interest rates elevates demand for gold, which produces no income but relies on price appreciation to attract investors.
Gold is enjoying an impressive run in 2016 after three lackluster years. Prices of the metal broke above the $1,300 per troy ounce threshold in Jun 2016 after Britain voted to leave the European Union (EU), sending shockwaves through global markets. The move roiled global financial markets and sparked as much as around 8% surge in the metal’s prices to trade at levels last seen in Jul 2014. The Brexit-induced chaos in the global markets spurred investors’ demand for safe havens, triggering a strong rally in gold.
Moreover, gold prices have been gaining support from expectations that central banks around the world would step up monetary stimulus to avert economic damages from Brexit. The deferral of U.S. interest rate hikes has been another major factor that has helped gold regain its shine this year after a dull 2015.
What Could Keep Gold Shining?
Notwithstanding the recent pullback, gold still has room for further upside since the clouds of uncertainty continue to hover over the horizon. There is still a lot of risk in the market that are expected to support prices of the metal in the coming days. Concerns about global economic growth and lingering economic and political uncertainties are likely to act in favor of gold in the fourth quarter of 2016.
Moreover, prices of the metal should find support from physical demand from top consumers India and China during the festive season later this year. India will be a major driver with pent up demand having intensified due to the shutdown of jewelry stores earlier this year.
Another factor that will eventually be a tailwind for gold is the supply of the precious metal having already attained peak levels as per reports. Global production of gold is likely to decline by 3% in 2016, thus ending a seven-year stint of rising output. Lower mined outputs forming the gold supply could help prices move north.
Top Gold Stocks to Buy Now
As the scenario for bullion remains favorable, it would be a prudent idea to invest in some top-quality gold mining stocks that boast solid growth prospects and a good Zacks rank. These stocks have also delivered healthy year-to-date returns. Below we highlight 5 top gold stocks that are poised for a good run in the final quarter of the year.
New Gold, Inc. (NGD - Snapshot Report)
Vancouver, Canada-based New Gold is engaged in the acquisition, exploration, development, and operation of mineral properties. It primarily explores for gold, silver and copper deposits.
New Gold carries a Zacks Rank #1 (Strong Buy) and has seen its shares jump roughly 87.5% year to date. The company has expected earnings growth of around 491.7% for the current year. The Zacks Consensus Estimate for 2016 has moved up 60% over the last 30 days.
AngloGold Ashanti Ltd. (AU - Snapshot Report)
Headquartered in Johannesburg, South Africa, AngloGold Ashanti operates as a gold mining and exploration company.
AngloGold Ashanti sports a Zacks Rank #2 (Buy) and has gained roughly 124.2% year to date. The Zacks Consensus Estimate for 2016 has moved up around 19% over the last 30 days. The stock has expected earnings growth of 440% for the current year.
Gold Fields Ltd. (GFI - Snapshot Report)
South Africa-based Gold Fields is an unhedged, globally diversified producer of gold with eight operating mines in Australia, Ghana, Peru and South Africa. The stock carries a Zacks Rank #2 and has gained roughly 76.8% year to date. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for 2016 has moved up around 14% over the last 30 days. The stock has an expected earnings growth of a whopping 600% for the current year.
IAMGOLD Corp. (IAG - Snapshot Report)
Toronto-based IAMGOLD is engaged in the exploration, development and operation of gold mining properties. It also explores for copper and silver. The company holds interests in four operating gold mines, as well as exploration and development projects located in Africa, South America and Canada.
IAMGOLD, a Zacks Rank #2 stock, has gained roughly 185.2% year to date. The company has expected earnings growth of roughly 111.6% for the current year.
Acacia Mining plc (ABGLF - Snapshot Report)
Acacia Mining, together with its subsidiaries, mines, processes, and sells gold in Africa. The company also produces co-products, such as copper and silver.
The stock, which carries a Zacks Rank #2, has surged around 135.8% year to date. The Zacks Consensus Estimate for 2016 is 32 cents, a significant improvement from 2 cents in the prior year. The Zacks Consensus Estimate for the current year has moved up around 23% over the last 30 days.
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