Gold Glitters on Coronavirus Fears: 5 Stocks to Buy

Gold has gained 12.5% so far this year, outperforming most major asset classes. In fact, gold prices are currently trending above $1,700 an ounce — levels last seen in 2012. The yellow metal has been benefiting from strong safe-haven flows as investors grapple with the uncertainty surrounding the economic impact of the COVID-19 pandemic both on short and long-term basis.

Gold Investment Demand Remains Strong

The global uncertainty and financial market volatility led to gold ETFs gaining 298 tons in the first quarter of 2020 — the highest quarterly inflow in four years. The momentum continued in April with gold ETFs adding 170 ton. Net inflows were up 5% to $9.3 billion in April, taking the total holdings to a new all-time high of 3,355 tons. Assets under management (AUM) also reached a new record high of $184 billion in April.

However, jewelry demand has taken a hit as markets have been shut down across various countries to stem the spread of the virus. Further, high gold prices have thwarted demand. Nevertheless, strength in investment demand continues to mitigate this impact. Central banks also remain net buyers of gold albeit at a lower level.

Gold’s Prospects Bright

The pandemic has also impacted gold production as miners had to suspend operations in accordance to government mandates. Per the World Gold Council, gold production in the first quarter declined 3% year over year – the steepest decline since first-quarter 2017. Consequently, an impending demand-supply imbalance bodes well for gold prices.

The uncertainty regarding virus' impact on the global economy and the governments’ stimulus measures are likely to sustain gold until situation stabilizes. It will continue to be the preferred investment option supported by the low-interest rate environment and virus-induced global slowdown.

Further, the combination of higher gold prices and lower oil prices, which make up significant portion of a miner’s costs, is likely to translate into improved operating margins and higher free cash flow for gold miners.

The Gold Mining industry has rallied 20.1% so far this year against the S&P 500’s decline of 7%. The industry, which falls under the broader Basic Material sector, declined 13.2%.

The industry currently carries a Zacks Industry Rank #17, which places it at the top 7% of 256 Zacks industries.

Our research shows that the top 50% of the Zacks-ranked industries outperforms the bottom 50% by a factor of more than 2 to 1. Looking at the aggregate earnings estimate revisions, it appears that analysts are gradually gaining confidence in this group’s earnings growth potential. In the past year, the industry’s earnings estimates for the current year have been revised upward by 92%.

We thus believe that the time is right for investors to add some gold stocks to their portfolio.  We have employed the Zacks Screener to pick five top-ranked gold stocks. Our research shows that stocks with the combination of a VGM Score of A or B and a Zacks Rank #1 (Strong Buy) or 2 (Buy) offer good investment opportunities.

You can see the complete list of today’s Zacks #1 Rank stocks here.

Our Top Picks

AngloGold Ashanti Limited AU: Based in Johannesburg, South Africa, the company currently has a Zacks Rank #1 and a VGM Score of A. The company has a long-term estimated earnings growth rate of 19.5%. The Zacks Consensus Estimate for 2020 earnings indicates year-over-year growth of 113%. The estimates have been revised upward by 6% over the past 60 days.

Alamos Gold Inc. AGI: Based in Toronto, Canada, this company has a Zacks Rank #2 and a VGM Score of B. The Zacks Consensus Estimate for 2020 earnings suggests year-over-year improvement of 59%. The estimates have moved north by 23% over the past 60 days. The company has a trailing four-quarter positive earnings surprise of 24.8%, on average. The company has a long-term estimated earnings growth rate of 24.2%.

B2Gold Corp. BTG: The Zacks Consensus Estimate for fiscal 2020 earnings of this Vancouver, Canada-based company suggests growth of 218.6% compared with the prior fiscal. The estimate has moved up 7% over the past 60 days. The company surpassed estimates in each of the trailing four quarters, the average positive surprise being 21.5%. The stock has a Zacks Rank #2 and a VGM Score of A. The company has a long-term estimated earnings growth rate of 16.3%.

Pretium Resources Inc. PVG: This Vancouver, Canada based company has a Zacks Rank #2 and a VGM Score of A. The Zacks Consensus Estimate for the current fiscal suggests year-over-year growth of 16.4%. The estimates have gone up 8% over the past 60 days. The company has a trailing four-quarter positive earnings surprise of 33.1%, on average.

Gold Fields Limited GFI: Based in Sandton, South Africa, the company presently has a Zacks Rank #2 and a VGM Score of A. The Zacks Consensus Estimate for 2020 earnings indicates year-over-year improvement of 31%.

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Pretium Resources, Inc. (PVG) : Free Stock Analysis Report
 
Gold Fields Limited (GFI) : Free Stock Analysis Report
 
AngloGold Ashanti Limited (AU) : Free Stock Analysis Report
 
B2Gold Corp (BTG) : Free Stock Analysis Report
 
Alamos Gold Inc. (AGI) : Free Stock Analysis Report
 
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