There always have been the hardcore gold bug investors and Wall Street analysts who tout the precious metal constantly and stay very overweight regardless of demand and the macro picture. The bottom line is that, from an asset allocation standpoint, all structured portfolios need a weighting to precious metals between 3% and 5%. However, there are times when investors should overweight gold, and now is looking more and more to be one of those times.
When you combine the geopolitical witches’ brew of the trade issues with China, the rising tensions with Iran and the belligerence of the political cycle starting to reenter the news cycle in a big way, you have all the ingredients for gold to surge even more.
RBC analysts think there is a 40% chance that gold, which recently closed at record highs at $2,041 per ounce, could hit $3,000 by the first quarter of next year. BofA Securities also believes that gold could hit that mark. If you toss in the rampant printing of money, dollar weakness and the overall nervousness from the COVID-19 pandemic and the civil unrest in major U.S. cities, all the factors are in place for a continued move higher.
Here is what BofA Securities said when it raised its target on gold:
Gold has rallied as real rates have fallen. Continued fiscal spending as governments are mending the damage from Covid-19, backstopped by central banks means that interest rates will remain low, at the same time as the economy reflates. We reinforce our $3,000 per ounce target. This is very supportive for gold. With the US elections scheduled for November and the EU’s Recovery fund in place from January 2021, we expect demand to remain supported also next year.
The SPDR Gold Shares ETF (NYSEARCA: GLD) broke out of a six-year trading range last September and hasn’t looked back since, hitting a new all-time high this week. Top technical gurus feel that the long sideways move was part of the impetus for a big price breakout, and with huge demand pouring in for physical gold all over the world, tight supplies could get even tighter. This is the investment vehicle of choice for many investors looking to have physical gold holdings.
BofA Securities raised price targets on many gold stocks it has rated Buy. Here we focus on four top miners, and one of the best royalty companies, in which the analysts increased their targets the most.
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.
BofA Securities loves the stock and noted this recently when the company posted solid second-quarter results:
For the second quarter of 2020 the company reported adjusted earnings per share of $0.18, just above consensus of $0.17. We attribute the beat to a lower tax rate. For 2020, Agnico Eagle tightened upwards its production range from 1.63-1.73 million ounces to 1.68-1.73 million ounces. Costs were unchanged. Based on sector wide multiple expansion, we raised our target multiple from 2.25 to 2.50 times net asset value.
Shareholders receive just a 0.96% dividend. The BofA Securities price target was lifted to $90 from $80, and the Wall Street consensus target is $77.77. Agnico Eagle Mines stock closed trading Wednesday at $83.51.
This is a small-cap gold stock for aggressive investors looking for sector exposure. 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).
B2Gold 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.
BofA Securities raised its $6.40 price target to $8.50, way above the $3.50 consensus target. B2Gold stock ended Wednesday at $7.37.