The whole world is currently on edge with the coronavirus-induced crisis showing no signs of letting up, which has only added more fuel to apprehensions regarding the global economic growth. This, in turn, has sent investors scurrying for safe-haven assets like gold. Notably, the yellow metal has yielded a return of 7.5% year to date.
First detected in Wuhan in December the coronavirus rapidly took the shape of a pandemic. Per the World Health Organization’s situation report as of Apr 6, 2020, number of infected people across the globe is currently at 1.2 million with the death toll at 77,200. The United States is the worst affected, with 307,318 cases, followed by Spain with 130,759 and Italy with 128,948.
The Fed has slashed interest rates to zero and intends to buy at least $700 billion in government and mortgage-related bonds as part of a wide-ranging emergency action to protect the economy from the impact of the coronavirus outbreak. This marked an unprecedented move by the U.S. central bank since the 2008 financial crisis. This has fueled the yellow metal’s prices as gold tends to attract buyers in a low interest-rate environment.
Per the U.S. Bureau of Labor Statistics latest report, the U.S economy shed 701,000 jobs for the first time in a decade on account of its efforts to contain the virus. Leisure and hospitality accounted for 65% or 459,000 of the job cuts. The unemployment rate shot up to 4.4% — the highest unemployment rate since August 2017. The 0.9 percentage point rise in the unemployment rate marked the largest over the month increase in the rate since January 1975.
Manufacturing index in March as per the Institute for Supply Management’s latest report was at 49.1% — contracting again after two months of expansion. Contraction was noted in production, new orders, and employment. The manufacturing sector has clearly been impacted by the coronavirus pandemic and energy market volatility.
All these developments further boosted gold prices, which has been gaining steadily this year — starting with the U.S-Iran tensions and now the coronavirus-scare. Further, lower oil prices and fears of supply crunch as miners are halting their operations as per government mandates have contributed significantly to the price movement. On Apr 6, future price of gold for June delivery increased 2.6% to settle at $1,693.90 an ounce.
The Organisation for Economic Cooperation and Development (“OECD”) anticipates annual global GDP growth will likely drop to 2.4% in 2020 — the lowest rate since 2009. According to the body, in the case of a more intensive coronavirus outbreak, spreading widely throughout the Asia Pacific region, Europe and North America, the global growth could drop to 1.5% in 2020. The uncertainty regarding virus's impact on the global economy and the governments’ stimulus measures should keep supporting gold. It will continue to be the preferred investment option supported by the environment of low interest rates and virus-induced global slowdown.
The Gold Mining industry has rallied 23.5% over the past year against the S&P 500’s decline of 14.2%. Notably, the industry falls under the broader Basic Material sector, which declined 36.7%.
The industry currently carries a Zacks Industry Rank #21, which places it at the top 8% 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 68%.
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 six 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
Alamos Gold Inc. AGI: Based in Toronto, Canada, this company has a Zacks Rank #2 and a VGM Score of A. The Zacks Consensus Estimate for 2020 earnings indicates year-over-year growth of 30%. The estimate has moved north by 18% over the past 60 days The company has a trailing four-quarter positive earnings surprise of 9.82%, on average. The company has a long-term estimated earnings growth rate of 15.4%.
Gold Fields Limited GFI: The Zacks Consensus Estimate for 2020 earnings of the Sandton, South Africa-based company suggests year-over-year growth of 30.9%. The estimates have also moved up 38% over the past 60 days. This Zacks Ranked #2 stock has a VGM Score of A at present.
Kinross Gold Corporation KGC: Based in Toronto, Canada, the company presently has a Zacks Rank #2 and a VGM Score of B. The Zacks Consensus Estimate for 2020 earnings has moved up 7% in the past 60 days, indicating year-over-year growth of 38%. The company has a trailing four-quarter positive earnings surprise of 182.5%, on average.
Harmony Gold Mining Company Limited HMY: Based in Randfontein, South Africa, the company currently has a Zacks Rank #2 and a VGM Score of A. The Zacks Consensus Estimate for 2020 earnings indicates year-over-year growth of 186%. Further, the estimates have moved up 5% over the past 60 days.
B2Gold Corp. BTG: The Zacks Consensus Estimate for fiscal 2020 earnings of this Vancouver, Canada-based company suggests growth of 200% over the prior fiscal. The company beat estimates in the trailing four quarters by 23.8%, on average. The stock carries a Zacks Rank #2 and a VGM Score of B. The company has a long-term estimated earnings growth rate of 6.8%.
Pretium Resources Inc. PVG. This Vancouver, Canada based company carries a Zacks Rank #2 and a VGM Score of B. The Zacks Consensus Estimate for the current fiscal suggests a year-over-year growth of 7.3%. The company has a trailing four-quarter positive earnings surprise of 32.1%, on average.
Today's Best Stocks from Zacks
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Pretium Resources, Inc. (PVG) : Free Stock Analysis Report
Kinross Gold Corporation (KGC) : Free Stock Analysis Report
Gold Fields Limited (GFI) : Free Stock Analysis Report
Harmony Gold Mining Company Limited (HMY) : Free Stock Analysis Report
B2Gold Corp (BTG) : Free Stock Analysis Report
Alamos Gold Inc. (AGI) : Free Stock Analysis Report
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