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Gold Glitters on Simmering US-China Tensions: 5 Picks

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On May 28, the stock market rally was abruptly halted when U.S. President Donald Trump said he would hold a news conference on China, raising possibilities of a fresh conflict. The Dow Jones Industrial Average, S&P 500 and Nasdaq Composite closed 0.6%, 0.2% and 0.5% lower, respectively, on the day. The trade war had begun in March 2018 after America placed additional tariffs on steel and aluminum imports from China.

After lasting for nearly two years and cutting $1.7 trillion from American companies' market cap, the countries agreed on a phase-one trade deal just before the coronavirus outbreak. However, China’s alteration of human rights policies that includes relationship with Hong Kong and treatment of a Muslim minority has renewed tensions, forcing investors to rush to safe-haven assets, especially the yellow metal.

Hong Kong on Debatable Ground

On May 28, China passed a national security legislation for Hong Kong. The legislation targets the “secession, subversion, terrorism and foreign interference” of Hong Kong and alters the territory’s constitution. Hence, Hong Kong’s government will operate on policies framed by China leaders.

In turn, the United States can no longer treat Hong Kong as an autonomous state, which will rather follow the same policies like China. Trump might sign an executive order to remove Hong Kong’s special trading status with the United States that was applied to the territory under a 1992 US law.

The news raised jitters among investors as revoking Hong Kong’s special trade relationship with the United States would lead to levying of higher tariffs and tougher export controls on the territory. The United States and Hong Kong has an estimated trade of $38 billion a year. Alongside, the territory hosts nearly 1,300 U.S. companies, including every major financial institution.

Why Buy Gold?

With the broader market taking a beating as tensions between the United States and China erupt, investors fled to safe-haven assets like gold as it acts as a hedge against market volatility. On May 28, June gold advanced about 0.1% to settle at $1,728.30 an ounce. Meanwhile, August gold ended $1.50 or 0.1% higher at $1,728.30 an ounce.

5 Gold Mining Stocks to Buy

Given the current scenario, we have shortlisted five gold mining stocks that are poised to grow. The companies belong to the Zacks Mining - Gold industry that has an expected earnings growth rate of 22.7% for the current year. The companies hold a Zacks Rank #1 (Strong Buy) or 2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Agnico Eagle Mines Limited (AEM - Free Report) engages in the exploration, development, and production of gold and other mineral properties. This Zacks Rank #1 company has an expected earnings growth rate of 75.3% for the current year. The Zacks Consensus Estimate for its current-year earnings has moved up 38.2% over the past 60 days.

AngloGold Ashanti Limited (AU - Free Report) operates as a gold mining company. This Zacks Rank #1 company has an expected earnings growth rate of more than 100% for the current year. The Zacks Consensus Estimate for its current-year earnings has moved 6% north over the past 60 days.

Equinox Gold Corp. (EQX - Free Report) engages in the acquisition, exploration, and development of gold and other mineral deposits. This Zacks Rank #1 company has an expected earnings growth rate of 65.5% for the current year. The Zacks Consensus Estimate for its current-year earnings has climbed 33.3% over the past 60 days.

Gold Fields Limited (GFI - Free Report) operates as a gold producer. This Zacks Rank #1 company has an expected earnings growth rate of nearly 31% for the current year. The Zacks Consensus Estimate for its current-year earnings has risen 37.5% over the past 90 days.

U.S. Gold Corp. (USAU - Free Report) operates as a gold exploration and development company in the United States. This Zacks Rank #2 company has an expected earnings growth rate of 57.7% for the current year. The Zacks Consensus Estimate for its current-year earnings has moved 33.6% up over the past 60 days.

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