Gold, that sinister yet provocative commodity that has been absolutely mauled since highs posted almost five years ago, has been slowly moving back to a critical level. In fact, with this year’s 8% or so move, the precious metal is very close to breaking the downtrend line that formed in early 2013. The real question for investors is whether this finally is the time when gold breaks out and moves meaningfully higher.
In a new JPMorgan research report, the commodity team raises their price target for gold, and they make the case that there are numerous reason for increased bullishness. With a sputtering economy, it’s looking ever more likely that the Federal Reserve will not raise rates again until 2017. The weakness in the dollar this week is what shot gold stock prices higher. Add in geopolitical and additional financial worries, and the safe haven status once again may be in demand.
The analyst has three top stocks that are rated Overweight that make good sense for investors looking to add exposure.
Agnico Eagle Mines
Long-time Wall Street favorite 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 Mines has declared a cash dividend every year since 1983.
The company was the most successful in reducing its all-in sustaining costs year over year in 2015. Agnico Eagle Mines came in 29% lower, at $810 per ounce. It also lowered its cash cost guidance for the second time this year to $850 per ounce (midpoint) from $880 per ounce. The upgrades have mainly been due to higher-than-expected grades and currency tailwinds from the Canadian dollar and the Mexican peso.
The company is one of the top picks at JPMorgan as it fits the firm’s objectives of having quality mining assets with attractive margins, and it also sports a very solid balance sheet.
Agnico Eagle Mines investors are paid a 1.0% dividend. The JPMorgan price objective for the stock is set at $33.50, and the Thomson/First Call consensus price target is $33.40. The shares closed Thursday at $32.73, up 4.24% on the day.
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