Commodities & Metals

Huge Gold ETF Has Added 32 Tons: Rally Looks to Resume

The massive 2020 gold rally peaked in early August and has trended sideways to down for the past six weeks, but that may be changing. According to its website, the giant SPDR Gold Shares (NYSEARCA: GLD) exchange-traded fund (ETF), which actually holds physical gold, added 32 tons of the precious metal since last Friday. Assuming that this huge number is accurate, the increase more than wipes out the 20 tons of outflow that occurred since gold’s August 6 peak.

Many on Wall Street see this as a very important development, as demand from investors has driven the huge rally in gold this year, and a return of inflows to the fund after six weeks of outflows could mean a resumption in the rally. Gold is a precious metal commodity, and many investors want to hold physical gold as a hedge against an overall decline in economic conditions, as well as against inflation. Some may use it as a method of portfolio diversification.

Given the impending election, the ongoing social disturbances across the country, issues with China and a host of other reasons, it makes sense for investors to take advantage of the recent dip and add exposure to the sector.

We screened the BofA Securities research universe looking for gold-mining stocks rated Buy. The following five have pulled back nicely from August highs and are offering solid entry points. It is important to remember, though, 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 a 1.01% dividend. The BofA Securities price target for the shares is $90, and the Wall Street consensus target is $85.93. Agnico Eagle Mines stock closed Tuesday’s trading at $78.94 per share.

B2Gold

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).

In 2020, B2Gold continued exploration drilling near Fekola and the Anaconda area with an $18 million program in Mali that focused on exploration at the Cardinal and FMZ zones near the Fekola deposit, which demonstrated potential for additional gold deposits within 3 kilometers of the Fekola mill, expanding the mineral resources within the Anaconda area, including the Mamba zone, and further testing the sulphide zones.

The 2020 and 2021 full-year forecasted earnings estimates for B2Gold recently have been increased, by a penny per share to $0.50 for the former and by two cents to $0.52 per share for the latter.

Shareholders receive a 2.42% dividend. The BofA Securities has an $8.50 price target, above the $7.50 consensus figure. The last B2Gold stock trade on Tuesday was reported at $6.62.

Barrick Gold

This is another top company in the sector and, despite the recent massive Buffett purchase, it is still offering a solid entry point. Barrick Gold Corp. (NYSE: 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.