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Wednesday, February 8, 2023

9 Gold Stocks to Stave Off the Market Boogeymen

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[Editor’s note: “9 Gold Stocks to Stave Off Coronavirus-Induced Volatility” is regularly updated to include the most relevant information available.]

When the novel coronavirus first seriously impacted the U.S., we witnessed unprecedented turmoil. Primarily, global equities markets crashed, sending investors scrambling for cover. Soon thereafter, the labor market evaporated millions of jobs, causing desperation that has fueled the present social unrest. But under these terrible circumstances, gold stocks typically shine.

However, recent economic data suggests that the precious metals sector is losing its importance. Earlier in June, the surprisingly positive May jobs report, where the economy added 2.5 million employment opportunities gave a much-needed confidence boost to Wall Street. Just recently, the U.S. Department of Commerce noted that retail sales in May jumped nearly 18% from April. In a way, this is a backdoor repudiation of gold stocks to buy.

Nevertheless, I wouldn’t get too comfortable adopting a risk-on attitude. For one thing, we’re talking about percentage gains from very low comparisons. Regarding changes from a year ago, several discretionary retail sectors, such as apparel, department stores and restaurants, are down significantly. Plus, you have Federal Reserve Chair Jerome Powell warning about long-term economic damage. Therefore, I wouldn’t trash gold stocks just yet.

Also, we’ve got to keep the scale of the coronavirus devastation in mind. Every week since the crisis began, workers have been filing initial jobless claims in the millions. For context, during the depth of the Great Recession, unemployment claims for a single week peaked at 665,000. You’ve got to wonder how long this present situation can hold up.

Truly, this is an unprecedented situation. Beyond that, there are no easy or possibly even correct answers. From my perspective, we have to decide on the least bad choice. But if there’s one thing I’m confident about, it’s that these nine gold stocks to buy have suddenly become supremely relevant.

  • Barrick Gold (NYSE:GOLD)
  • Agnico Eagle Mines (NYSE:AEM)
  • Wheaton Precious Metals (NYSE:WPM)
  • Sibanye Stillwater (NYSE:SBSW)
  • Coeur Mining (NYSE:CDE)
  • Hecla Mining (NYSE:HL)
  • Americas Gold and Silver (NYSEMKT:USAS)
  • Great Bear Resources (OTCMKTS:GTBAF)
  • Revival Gold (OTCMKTS:RVLGF)

Gold Stocks: Barrick Gold (GOLD)

Gold Stocks: Barrick

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One of the biggest gold stocks by market cap, Barrick is a great anchor to have for your precious metal portfolio. Since the start of the year, GOLD stock is up over 32% despite absorbing the impact of recent positive economic data.

First, as a major institution within the mining industry, GOLD stock is likely to offer you a relatively evenhanded exposure to daily gold fluctuations. Fundamentally, the underlying company has been making significant progress. For instance, in its fourth quarter of 2019 earnings report, Barrick rang up revenue of $2.88 billion, up over 51% year-over-year. Plus, it carried positive momentum into Q1 2020, which saw Barrick post per-share earnings that were in line with analysts’ expectations.

Second, despite the choppiness, GOLD stock has been trending nicely on a bullish channel in place since last November. With fear not only ramping up due to the coronavirus but also because of economic and societal uncertainty, Barrick Gold should perform quite well this year.

Agnico Eagle Mines (AEM)

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Another one of the big players among gold stocks, Agnico Eagle should have enjoyed a better start to 2020. In its Q4 2019 earnings report, Agnico Eagle delivered adjusted earnings per share of 37 cents. Additionally, the miner generated top-line sales of $753.1 million, which was up 40% against the year-ago quarter. Both figures beat covering analysts’ consensus targets.

Unfortunately, management guided down their expectations for gold production for the year. Instead of 1.9 million to 2 million ounces, the leadership team anticipates 1.875 million ounces. That sent AEM stock down in a hurry.

However, with the company’s most recent Q1 2020 earnings report, AEM stock received a much better response. EPS was 23 cents, up 3 cents from the consensus estimate, while revenue was $671.9 million, comfortably above the consensus of $652.5 million.

Include the fear factor and you have a much stronger case now for AEM stock. I still believe that’s the case despite some nearer-term rumblings.

Gold Stocks: Wheaton Precious Metals (WPM)

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In my opinion, no portfolio of gold stocks to buy is complete without mentioning companies like Wheaton Precious Metals. Unlike traditional mining units, Wheaton uses a streaming business model. Rather than mine for metals themselves, WPM buys out a mining company’s production (either part or whole) at predetermined prices. As a result, this makes WPM stock far more stable than traditional mining investments.

Of course, this situation works the opposite way as well. If gold explodes into a mania, WPM stock is unlikely to skyrocket with its peers (although it’s proving to be very robust right now). Currently, speculators are gambling that we’ll see an enormous sentiment lift. For instance, China’s government has been busy bolstering their gold reserves, while other nations have been lackadaisical in this department.

Still, this business of gold is a cruel one. Sometimes, the precious metals can drop despite seemingly positive fundamentals. Thus, WPM stock gives you a little more stability in a very wild market.

Sibanye Stillwater (SBSW)

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As the largest individual gold producer in South Africa, Sibanye Stillwater is one of the most popular gold stocks. Certainly, it doesn’t hurt that the underlining country features an abundance of riches. Therefore, I consider the current volatility — though admittedly steep — in SBSW stock a buying opportunity.

Contributing to the red ink, though, is the drama surrounding palladium. Rather quietly, palladium exploded to become the most expensive precious metal — well higher than gold, platinum and silver. A major reason for this is that the metal is very strategic as many industries utilize it for their products.

But with the global economy in turmoil, the palladium price has been all over the place; hence, the extreme volatility of SBSW, making it riskier than other gold stocks. Nevertheless, palladium’s relevance to the electronics industry should eventually bolster demand.

Additionally, Sibanye is the world’s largest primary producer of platinum. Interestingly, the U.S. is apparently running short of this precious metal. Thus, you may want to consider SBSW stock, if you can handle the heat.

Gold Stocks: Coeur Mining (CDE)

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As one of the mid-tier gold stocks, Coeur typically would offer you a balance between upside rewards and downside mitigation. However, the first three months of this year has been awful, with CDE stock plummeting nearly 59%. Admittedly, this wasn’t what I was hoping for. On the flipside, though, it does offer a compelling entry point given the positive environment for gold.

As with other mining companies, analysts didn’t like the mixed bag that Coeur delivered in terms of metals produced. On certain projects, lower ore crushing rates led to overall lower production. However, management invested in higher-capacity machinery which should resolve these challenges. Therefore, it’s possible that CDE stock could get back on the Street’s good graces.

Recent events suggest that this is happening right now. Since the beginning of May, CDE is up almost 24% despite incurring downside pressure in recent sessions. Once investors get over their newfound fascination with equities, Coeur may once again move toward prior plateaus.

Hecla Mining (HL)

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Another popular mid-tier name, several investors were optimistic about Hecla heading into the new year. In the final calendar quarter of 2019, HL stock nearly doubled in value. Early in January, management seemingly justified that optimism with strong production figures: silver production was up 22% and gold was up 4%. Unfortunately, “seemingly” is the operative word here.

When the company released its actual results for the quarter ending Dec. 31, Wall Street wasn’t quite so impressed. Despite revenue growth of 68% YOY to $236.3 million, Hecla still inked a net income loss of $8 million. Basically, the organization is not as efficient as other miners. And that’s worrisome given that this is a positive environment for gold stocks.

Moreover, the Covid-19 pandemic impacted operations, though Hecla was able to keep its key mines operation. In its disclosure for its most recent Q1 2020 earnings report, management expects a stronger output as operations normalize. Though HL stock remains a very speculative bet, the positive environment for precious metals may make this a worthwhile idea. Better yet, shares are more attractive for current gamblers as prices have dipped from this year’s highs.

Gold Stocks: Americas Gold and Silver (USAS)

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For the last three gold stocks on this list, I’m going to focus my attention on the junior miners. Fair warning: these are extremely speculative names, so please don’t go crazy on them.

First up is Americas Gold and Silver. One of the more promising of the small miners, USAS stock experienced a strong run up in December. However, as we rang in the new year, shares slowed, then became downright volatile, beginning in February. Unfortunately, disappointing financial results negatively impacted the equity valuation.

Due to a recapitalization plan at one of Americas Gold and Silver’s projects, production for certain metals were down for the year. Furthermore, expenses related to mining industrial metals increased, impeding earnings.

On the positive side, the company expects to see big increases from the addition of a new project. Therefore, USAS stock might appeal for the risk takers. Furthermore, USAS stock has responded very well to growing fears of economic instability, making this a risky but worthwhile bet.

Great Bear Resources (GTBAF)

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Although one of the most bullish small-cap gold stocks of last year, between late February to mid-March, Great Bear Resources lived up to its name. Now, it’s one of the high-flying names among the speculative junior miners.

Essentially, much uncertainty exists among lesser-known gold stocks. Frankly, Great Bear is an extremely speculative belt, fueled in part by fundamentals and hope. However, the fundamentals encompass a 100% royalty-free interest in the Dixie project. This is an area known for high-grade gold and is situated very close to the renowned Red Lake gold district.

Will Dixie turn into another Red Lake, which has produced roughly 30 million ounces of gold? Obviously, no one knows for sure. But that is the compelling story driving GTBDF stock. Factor in the broader economic turmoil and the narrative – while still risky – becomes even more attractive.

That said, because Great Bear is one of the most emotionally driven gold stocks – and I don’t necessarily mean that in a good way – you may want to wait this one out just a bit. There’s a possibility that shares could drop near its 50-day moving average, though that would make things very interesting for the risk-taker.

Gold Stocks: Revival Gold (RVLGF)

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If you want a junior miner that isn’t completely nuts, take a look at Revival Gold. Currently, Revival Gold has interests in three projects: Beartrack, Arnett Creek Gold and Diamond Mountain Phosphate. According to their website, management is interested in pursuing other exploration and development opportunities, which may entail mergers and acquisitions.

For now, RVLGF stock is a gamble that these projects will develop according to plan. Naturally, this is a huge risk. However, shares have traded sideways — albeit in choppy fashion — since the spring of 2018. To me, this implies that the markets are reserving judgment.

I suppose no bad news is good news for RVLGF stock. While I’d like to give a more convincing argument, this is the nature of junior mining investments. Enjoy!

A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare. As of this writing, he is long the precious metals mentioned in this article.

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