After gold blew through the $2,000 an ounce level to new all-time highs, both gold and silver experienced a classic pullback as interest rates drifted higher and some strength in the dollar was seen. Gold dropped 10% from the highs, and silver quickly backed up a stunning 20%. While all this was happening, major firms on Wall Street were raising their targets for the precious metal, some to as high as $3,000 per ounce.
Just as the selling was thinning out, we find out that legendary investor Warren Buffett disclosed a stunning 20 million share purchase of Barrick Gold Corp. (NYSE: GOLD). This is remarkable as for years Buffett has shown a distinct disdain for gold, and many think either Ted Weschler or Todd Combs made the purchase. Both are investment managers that work for Buffett’s Berkshire Hathaway investment giant and run a portion of the company’s stock portfolio.
It’s important to remember that key reasons for owning gold remain in place, and rates have dropped again and the dollar is trading at the lowest level in over two years. The volatility that surely will accompany the upcoming election, along with the issues with China, the domestic unrest, the overbought stock market and a host of others, are not going away anytime soon.
We screened the BofA Securities gold research coverage looking for stocks that make sense for investors looking to initiate or add to precious metal holdings. We found five that look like solid ideas, and all are rated Buy. It’s important to remember that no single analyst report should be used as a sole basis for any buying or selling decision.
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, and it reported a solid second-quarter earnings beat with production higher and costs lower, driven by LaRonde. Commercial production of 383,000 ounces was 6% higher.
Shareholders receive just a 0.99% dividend. The BofA Securities price target on the shares is $90, and the Wall Street consensus target is $84.21. Agnico Eagle Mines stock closed Thursday’s trading at $80.91 a share.
Despite the huge Buffett purchase, shares of this top company still offer a solid entry point. Barrick Gold and Randgold Resources completed their merger on January 1, 2019. This created the world’s largest gold company in terms of production, reserves and market capitalization.
The company holds a 50% interest in the Veladero mine located in the San Juan Province of Argentina; 50% interest in the KCGM, a gold mine located in Australia; 95% interest in Porgera, a gold mine located in Papua New Guinea; 50% interest in the Zaldavar, a copper mine located in Chile; and 50% interest in the Jabal Sayid, a copper mine located in Saudi Arabia.
Barrick also owns gold mines and exploration properties in Africa and gold projects located in South and North America. It has a strategic cooperation agreement with Shandong Gold.
The company reported Second-quarter earnings were better than expected and the company hiked its quarterly dividend by 14%. Barrick Gold maintained 2020 guidance of 4.6 million to 5.0 million ounces and also guided second-half 2020 gold output to be in line with the first half of 2.4 million ounces.
With the dividend increase, investors now receive a 1.07% yield. BofA Securities has a $36 price target, while the consensus target is $32.55. Barrick Gold stock closed at $29.95 on Thursday.