Now May Be Time to Buy Gold as Geopolitical Tensions Soar
If you think Iran is the only current hot spot, all you need to do is look around the world, and there are numerous places where things could flare up. While the situation on the Korean Peninsula looks better than any time in recent history, the North Koreans have been known to bait and switch, and we still face the potential for trouble in Syria, Afghanistan and across the Middle East.
In a new report, RBC remains generally positive on the gold-mining stocks as prices have held despite the rise in U.S. interest rates, with another anticipated hike coming in June. While the firm remains cautious on the price of the precious metal going into the Federal Reserve meeting in June, the geopolitical issues remain in place.
The analysts have maintained the gold is a solid way to hedge against market volatility, especially when there is the omnipresent geopolitical component. RBC has numerous companies in its precious metals universe rated Outperform. These five trade in U.S. dollars.
This stock is one of the top companies in the sector and it sold off recently, providing a solid entry point. Barrick Gold Corp. (NYSE: ABX) produced 5.32 million ounces of gold in 2017, making it the world’s largest gold producer. At year-end 2017, Barrick’s reserve position totaled 64 million ounces, one of the largest in the world. The company is in the midst of building three new development project, which will add nearly 1 million ounces of new output by 2023.
The company has worked hard over the past few years to deleverage the balance sheet, and asset optimizations and digitization have been implemented to lower costs. Through its large reserve base, a slew of development assets and no hedging, the company offers investors a big exposure to gold.
Barrick just announced it bought a 20% stake in Midas Gold, which is developing a project in Idaho, for $38 million. The investment will give Barrick exposure to the Stibnite Gold project, which the company says has the potential to produce over 300,000 ounces of gold a year. Toronto-listed Midas Gold is attempting to renovate an old mining site in Idaho into a modern open pit mine.
Investors receive just a 0.9% dividend. The RBC price target for the shares is $16, and the Wall Street consensus target is $15.96. Shares closed Wednesday at $13.32.
This top company with a solid balance sheet makes sense for investors to consider. Goldcorp Inc. (NYSE: GG) engages in the acquisition, exploration, development and operation of precious metal properties in Canada, the United States, Mexico and Central and South America. It primarily explores for gold, silver, copper, lead and zinc deposits.
Goldcorp’s principal mining properties include the Red Lake, Éléonore, Porcupine and Musselwhite gold mines in Canada; the Peñasquito and Los Filos mines in Mexico; the Marlin property in Guatemala; the Cerro Negro and Alumbrera mines in Argentina; and the Pueblo Viejo mine in the Dominican Republic.
Some Wall Street analysts feel that the company deserves a premium valuation to its peers due to its excellent balance sheet, growth profile with lower cost new mines, longer average mine life and a solid dividend yield. Over the past few years, Goldcorp has been altering its mine plans, cutting spending and disposing assets in order to reduce costs and focus on the most profitable production.
Shareholders receive a 0.57% dividend. RBC has a $17 price target, and the consensus target is $17.86. Shares closed Wednesday at $13.47.