Why Gold May Be Breaking Out to All-Time Highs: 6 Stocks to Buy Now
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After trading sideways since early April, gold appears ready to break out and may make a run to test the all-time highs as early as this summer. With the spot price bouncing between $1,700 and $1,750 for over two months, the run through the $1,750 resistance has taken the current price up to Wednesday’s $1,762. Top technical analysts think this could be the breakthrough for the precious metal to challenge the all-time high of $1,917.90 per ounce that was set on August 22, 2011.
With the markets facing a “witches brew” of potential problems, not the least of which includes the coronavirus pandemic, massive social unrest, ongoing hostility in the volatile Middle East, trade-related issues with China and the sheer fact that the stock market is horribly overbought again, we could be in the beginning stages of a major break higher for gold.
One way to hedge another big stock market sell-off would be to buy gold. While the SPDR Gold Shares (NYSEARCA: GLD) is an outstanding vehicle, as you literally buy physical gold, investors may want to invest in some of the top miners and royalty companies. We screened the BofA Securities precious minerals universe looking for companies rated Buy and found six solid choices for investors. It’s important to remember that no single analyst report should be used as a sole basis for any buying or selling decision.
Agnico Eagle Mines
This is one of Wall Street’s most preferred North American gold producers. Agnico Eagle Mines Ltd. (NYSE: AEM) is a senior Canadian gold mining company that has produced precious metals since 1957. Its eight mines are located in Canada, Finland and Mexico, with exploration and development activities in each of these regions, as well as in the United States and Sweden.
The company and its shareholders have full exposure to gold prices due to its long-standing policy of no forward gold sales. Agnico Eagle has declared a cash dividend every year since 1983.
The company’s Meadowbank complex in Nunavutis is expected to achieve commercial production very soon, and the Amaruq project was expected to ramp up to full production by late last year. Amaruq’s gold output is forecast to rise from 130,000 ounces in 2019 to 351,000 ounces in 2021, and it could account for 17% of Agnico Eagle’s total output.
Shareholders receive a 1.30% dividend. The BofA Securities price target for the shares is $72 and the Wall Street consensus target is $69.97. Agnico Eagle Mines stock closed Wednesday’s trading at $61.54.
B2Gold
This is a small-cap gold stock for aggressive investors looking for sector exposure. B2Gold Corp. (NYSE: BTG) is a global, growth-oriented mid-tier gold producer whose primary assets include gold mines located in Nicaragua (La Libertad and El Limon), the Philippines (Masbate) and Namibia (Otjikoto) and Mali (Fekola).
The company recently announced positive drill results from the Mamba zone, which is located within the Anaconda area approximately 20 kilometers from the Fekola Mine, as well as positive infill drill results from the Fekola mineral resource area and step out results north of the Fekola resource.
After the company posted strong first-quarter results, the analysts said this:
B2Gold delivered a strong first quarter earnings result and ended the quarter with net debt of just $17 million, down 86% from year-end 2019. The quarterly dividend was doubled to $0.02 per share, good for an annualized yield of 1.5%; substantial 2020 cash flow is expected. Due to core mine outperformance, 2020 guidance was reiterated despite that the Nicaraguan assets could remain suspended.
BofA Securities has a $6.40 price target, and the consensus target is down at $3.50. The last B2Gold trade on Wednesday hit the tape at $5.35.
Barrick Gold
This is another top company, and its shares still offer a solid entry point. Barrick Gold Corp. (NYSE: GOLD) and Randgold Resources completed their merger on January 1, 2019. This created the world’s largest gold company in terms of production, reserves and market capitalization.
In the first quarter, gold production and sales were 1.25 million ounces and 1.22 million ounces, respectively. Copper production and sales amounted to 115 million pounds and 110 million pounds, respectively. The average market price for gold was $1,583 per ounce, and the same for copper was $2.56 per pound.
Barrick Gold stated in the spring that it is well positioned to achieve its full-year guidance despite the impact of the coronavirus pandemic and consequent lockdowns. Barrick recorded net earnings (on a reported basis) of $400 million, or $0.22 per share, in first-quarter 2020, up from $111 million ($0.06 per share) in the year-ago quarter.
Investors receive a 1.09% dividend. The $34 BofA Securities price target compares to a $29.84 consensus target. Barrick Gold stock ended Wednesday at $25.71.
Kirkland Lake Gold
This off-the-radar stock offers investors solid upside potential. Kirkland Lake Gold Ltd. (NYSE: KL) is a Canadian domiciled gold producer with three cornerstone operating mines located in Canada and Australia: Detour Lake, Fosterville and Macassa. It also owns and operates the Holt Complex, which includes three wholly owned mines and several assets in the Northern Territory of Australia.
In 2019, the company produced 974,615 ounces of gold at operating cash cost and all-in sustaining cost of $284 and $564 per ounce, respectively. That compares nicely with the current spot price of $1,728.
First-quarter results were solid, and the analysts noted:
Kirkland Lake Gold reported adjusted EPS of $0.70, in line with BofA. Free cash flow was $143 million in the first quarter of 2020. The company repurchased 9.7 million shares for $330 million in the first quarter. On the Q1 earnings call, CEO Makuch noted that Detour Lake and Macassa are ramping up.2020 guidance will be reinstated later this year. Kirkland Lake has withdrawn 3 year guidance as it assesses the longer term impacts of COVID-19. Expect it back in the fourth quarter. Maintain Buy.
The dividend yield is 1.30%. BofA Securities has set a $50 price target. A consensus price target was unavailable. Kirkland Lake Gold stock closed most recently at $38.42.
Newmont
This is one of the largest mining companies and a solid buy for more conservative accounts. Newmont Corp. (NYSE: NEM) is a leading gold and copper producer. It employs approximately 29,000 employees and contractors, with the majority working at managed operations in the United States, Australia, Ghana, Peru, Indonesia and Suriname. Newmont is the only gold producer listed in the S&P 500 index.
Newmont’s Merian gold mine in Suriname in South America contains gold reserves of 5.1 million ounces, and annual production is expected to average between 400,000 and 500,000 ounces of gold at competitive costs during the first five full years of production.
In keeping with its capital return objectives, Newmont announced a 79% hike in its quarterly dividend to $0.25 in February, effective the second quarter of 2020. The company has repurchased 12.4 million shares for $506 million, halfway to achieving its $1 billion share repurchase program. Approaching its centenary, the company has rebranded itself from Newmont Goldcorp to Newmont Corporation.
Holders of Newmont stock receive a 1.71% dividend. The $82 BofA Securities price objective is well above the consensus target of $73.17. Shares closed at $58.41 on Wednesday.
Wheaton Precious Metals
This precious metals royalty stock makes good sense for more conservative accounts looking to have exposure to the sector. Wheaton Precious Metals Corp. (NYSE: WPM) is a Canadian precious metals streaming company with approximately 60% of its revenues from the sale of silver and 40% from gold.
Under the terms of long-term contracts, the company purchases silver and gold from a variety of mines, including Goldcorp’s Penasquito mine in Mexico, Vale’s Salobo mine in Brazil, the Lundin Mining Zinkgruvan mine in Sweden, and Glencore’s Antamina and Yauliyacu mines in Peru, then sells the silver and gold into the open market.
This company also reported solid results, and the analysts said this:
Wheaton Precious Metals reported adjusted earnings per share of $0.215 in the first quarter, in line to BofA and Consensus. Cash flow was +50% year-over-year to $177 million ($0.40/sh). On April 2 the company withdrew guidance due to six mines being temporarily suspended due to COVID. Based on its growth, we believe the company should trade in line with peers.
Shareholders receive a 0.96% dividend. BofA Securities has set its price target at $47. The consensus target is $46.11, and Wheaton Precious Metals stock closed at $41.54.
We will continue to remind our readers that proper asset allocation should always include a single-digit percentage holding of precious metals like gold and silver. Not only do they tend to hedge inflation over the long term, they can really help if the market does go into correction or bear market mode, which is where we could be now. Gold tends to trade inverse to markets.
