5 Gold Stocks to Buy as Gold ETF Inflows Hit Record Levels
Global gold-backed exchange-traded funds (ETF) recorded net inflows for 10 consecutive months in September - the third time since the financial crisis. Specifically, in the last two cases of 10 consecutive months there were inflows in the period June 2007 to March 2008 and January 2016 to October 2016. In the first nine month period of 2020 there were global net inflows of gold ETFs of 1,003 tons (55.7 billion US Dollars) per World Gold Council, surpassing the previous record of 646 tons from 2009.
In particular, net inflows from gold ETFs exceeded the 1,000-ton mark for the first time. Global gold ETF holdings peaked at 3,880 tons at the end of September. The pandemic and its devastating impact on the global economy have impacted investor risk appetite and fueled demand for safe haven gold this year.
From January to September, SPDR Gold Shares, iShares Gold Trust and iShares Physical Gold ETC were the top 3 performers. They added 375.5 tons, 158.1 tons and 108 tons, respectively, and together made an inflow of around $ 36 billion.
North American funds dominate
Overall, all regions saw net inflows for the first nine months of 2020, led by North American funds, adding 648.9 tonnes, or $ 36.7 billion, to holdings. During this period, funds listed in Europe increased by 291.9 tonnes (equivalent to $ 15.5 billion), while fund holdings listed in Asia increased by 41.8 tonnes, or $ 2.3 billion. Funds listed in other regions added 20.7 tons, or $ 1.1 billion.
Gold prices rise 23% since the beginning of the year
Gold prices have seen an excellent spike so far this year, up 23%, largely due to the high level of uncertainty resulting from the COVID-19 pandemic. The yellow metal continues to outperform other major asset classes this year. Gold prices even hit an all-time high of $ 2,089.20 an ounce on August 7th. Gold futures for December delivery stood at $ 1,895.10 an ounce on October 8, 2020, after hitting a high of $ 1,905.3 an ounce.
How will gold perform in the remainder of 2020?
Gold will continue to be the preferred investment option due to the low interest rate environment and the global slowdown caused by pandemics. Persistent concerns about rising COVID-19 infection rates in various locations and a likely second wave as economies reopen will also fuel the price of gold. Uncertainty about the upcoming US presidential election will also increase demand for safe havens for the yellow metal.
As China recovers from the slowdown caused by the pandemic, gold demand could get a significant boost over the coming Christmas season. In addition, India received remarkably healthy monsoons for the second year in a row. Around 60% of the country's gold demand is tied to the rural population, which depends on the monsoons. This could help counter the negative effects of COVID-19 in rural areas. Historically, gold demand in India has been high later this year thanks to the wedding and holiday days when buying the yellow metal is seen as cheap.
While demand remains strong, gold supply is expected to remain constrained in 2020 due to the cessation of mining operations earlier in the year as per government mandates. Consequently, the impending imbalance between supply and demand will work in favor of metal prices.
Due to the gold price rally, the Zacks gold mining industry has grown 36.8% year-to-date, outperforming the S&P 500's 6.2% growth. The industry falls under the broader basic materials sector, which grew 1.9%.
The gold mining industry currently ranks 105th among the Zacks industry, making it among the top 42% of the 256 Zacks industries. Our research shows that the top 50% of Zacks industries outperform the bottom 50% by a factor of more than 2 to 1.
With the Zacks Screener, we selected five gold stocks that have a Zacks Rank 2 (Buy) and a VGM value of A or B. Our research shows that stocks have a Zacks rank of 1 (strong buy) or 2 (buy). In combination with a VGM value of A or B, there are solid investment opportunities. The full list of today's Zacks # 1 Rank stocks can be found here.
These stocks also outperformed the year-to-date S&P 500, which is shown in the chart below.
AngloGold Ashanti Limited AU: Based in Johannesburg, South Africa, the company currently has a VGM value of A. The Zacks Consensus Estimate for 2020 earnings shows growth of 124% year over year. The estimates have been revised upwards by 2% over the past 60 days. The company has an estimated long-term earnings growth rate of 25.6%. The share has gained 18.7% so far this year.
Eldorado Gold Corporation EGO: Headquartered in Vancouver, Canada, the company currently has an A VGM rating. The Zacks consensus estimate for the result for the current year shows an improvement of a whopping 2,325% compared to the previous year. The company has an estimated long-term earnings growth rate of 5%. The share has gained 39.5% in the year to date.
Yamana Gold Inc. AUY: Zacks' consensus estimate for the current year for the Toronto, Canada-based company indicates an 86% year-over-year increase. The estimate has moved 4% north in the past 60 days. The company has a trailing earnings surprise averaging 19.4% in the fourth quarter. The stock has a VGM rating of B and has an expected long-term earnings growth rate of 18.2%. Since the beginning of the year, the share has gained 49.3%.
Pretium Resources Inc. PVG: This Vancouver, Canada-based company currently has a VGM of B. The Zacks consensus estimate for the current fiscal year indicates 20% year-over-year growth. The estimate has increased 18% in the past 60 days. The company has a trailing earnings surprise averaging 31.7% in the fourth quarter. So far this year the stock has gained 13.3%.
Kirkland Lake Gold Ltd. KL: The Zacks consensus estimate for this Toronto, Canada-based company for the current year is an improvement of 22% over the previous year. The company has a trailing earnings surprise averaging 0.4% in the fourth quarter. The share has a VGM value of B. The company has an expected long-term earnings growth rate of 3%. The company's shares rose by 9.5% in the current year.
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Pretium Resources, Inc. (PVG): Free Stock Analysis Report
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