Needless to say, if any sector has struggled over the years it has been gold. Not only did the spot prices of gold and silver plummet since the highs posted almost five years ago in 2011, the overall sentiment toward precious metals and mining has been horrible. Things have sure changed this year, and while we are nowhere close to the old spot highs, it doesn’t appear that a total price breakdown will happen either.
In a new research report from RBC, which is a Wall Street firm that closely covers the sector, the analysts feel that the steady production rates, along with rising gold prices, suggests that the sector could post some strong financial results. They also note that companies should be able to show improvement in cash balances or decreases in net debt on corporate balance sheets.
The report cites two companies that have what the analysts term as “positive upside potential.” Investors should note trading before earnings releases is aggressive and only suitable for accounts styled that way.
This is a smaller cap company that more aggressive investors may want to consider. Kinross Gold Corp. (NYSE: KGC) engages in the acquisition, exploration, development and production of gold properties. The company’s gold production and exploration activities are carried out principally in Canada, the United States, the Russian Federation, Brazil, Chile, Ghana and Mauritania. It also produces and sells silver. As of December 31, 2015, the company’s proven and probable mineral reserves included 34.0 million ounces of gold, 41.0 million ounces of silver and 1.4 billion pounds of copper.
The stock has responded well to the weakening in the U.S. dollar, and also it got a boost recently when RBC upgraded the stock to Outperform from Market Perform.
The RBC price target is $4.75, and the Thomson/First Call consensus target is much lower at $3.90. The shares closed Thursday at $4.69, up almost 4% on the day.
Silver Standard Resources
This off-the-radar company also could deliver an earnings surprise. Silver Standard Resources Inc. (NASDAQ: SSRI) engages in the acquisition, exploration, development and operation of precious metal resource properties in the Americas. The company primarily explores for gold, silver, zinc and lead deposits. Its principal projects include the Marigold mine located in Humboldt County, Nev., and the Pirquitas mine located in the province of Jujuy, northern Argentina.
The company announced recently that it produced 50,520 ounces of gold during the first quarter of 2016. It also produced 2.6 million ounces of silver, slightly above fourth-quarter 2015 production.
The consensus price target for the stock is posted at $7.38, and shares closed most recently at $8.45, up 4.58% on the day.
Proper asset allocation should always include a single-digit percentage holding of precious metal like gold and silver. Not only do they hedge over the long term, they can really help if the market does go in to correction or bear market mode, as they tend to trade inverse to markets.