For years after gold rolled over in the fall of 2011, there was always a cadre of so-called sophisticated investors that sneered at the “goldbugs,” laughing that gold had no place in portfolio asset allocation and people that owned it were wasting their time and money in the process. Here’s a gigantic newsflash: they aren’t laughing now.
24/7 Wall St. has always advocated for at least a single-digit percentage position in the precious metal, as it provides a hedge against exactly what we are witnessing now. With many investors scared to look at their brokerage statements, even a 5% holding would have mitigated some of the damage done in the market sell-off.
A new report from Michael Jalonen and the commodities team at Merrill Lynch includes a raised 18-month price target on gold to a stunning $3,000 per ounce for the 2020 to 2022 period. The current spot price is $1,706. That would represent a stunning 75% move from current levels. Also, eight gold stocks were rated Buy, and here we feature the firm’s top three picks, as well as two others that are large-cap leaders in the sector. All are of course rated Buy.
It’s important to remember, the SPDR Gold Shares (NYSE: GLD) is an outstanding vehicle for investors not looking to buy gold mining companies, as you literally buy physical gold.
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 1.49% dividend. The Merrill price target for the shares is $62, and the Wall Street consensus target is $58.72. Agnico Eagle Mines stock closed on Tuesday trading at $53.80.
This is a small-cap gold stock for aggressive investors looking for sector exposure, and it is one of the three top picks at Merrill. 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.
Analyst estimates for the company have been rising. The first-quarter earnings estimate has been increased to $0.10 per share from $0.09, as have the full-year estimates for 2020 and 2021. The 2020 estimate has been increased to $0.41 per share from $0.37, and the full-year 2021 estimate has been scaled up from $0.32 to $0.35 per share.
Merrill has a $6.40 price target, which is well above the $3.50 consensus estimate. Shares were last seen trading at $4.57.