Safe-haven assets including gold and silver have attracted investors’ attention following Russia’s invasion of Ukraine, as well as amid the elevated inflation concerns.
Gold prices have been on the rise over the past few weeks as looming inflation and geopolitical tensions continue to add to the bullion’s appeal. The invasion of Ukraine has left a strong impact on the commodities market, weighing further on the global economy which has been already troubled.
Goldman Sachs Sees Further Upside
Two months ago, Goldman Sachs analysts increased their 12-month forecast for the gold price to $2150 per troy ounce, anticipating that the imminent U.S. growth slowdown would intensify worries over the U.S. recession and result in 300 tons of inflows into gold ETFs.
After Russia invaded its neighbor, the Wall Street bank indicated that the surge in commodity prices could further affect the developed market (DM) growth inflation mix, increase recession risks and boost gold ETF inflows to 600 tons. This would likely ultimately result in gold prices rising to $2,350 an ounce over the 12-month period, according to the bank’s base-case scenario.
The last time all significant demand driving factors rose at the same time was in 2010-2011 when gold prices surged by nearly 70%,” said Goldman analysts Mikhail Sprogis, Sabine Schels, and Jeffrey Currie.
The bankers have raised their gold targets for 3-month, 6-month, and 12-month periods from $1950/2050/2150 an ounce to $2300/2500/2500 per ounce, respectively.
This is the first time gold ETFs are gaining significant traction since 2020 and that momentum is expected to increase further when the market prices in the U.S. growth slowdown, which the bank believes is necessary to help combat inflation.
Here are the two must-own stocks to gain exposure to the rising gold prices:
Barrick Gold Corporation (NYSE:GOLD) is a company that engages in the exploration, mine development, production, and sale of gold and copper. The company has 16 operating sites across 13 countries.
The company has recently reported its FQ4 2021 financial results, topping the consensus estimates, and raised its quarterly dividend by 11%.
Barrick reported adjusted EPS of 35c in the quarter, compared to the 35c in the year-ago period and above the analyst estimates of 30c per share. Revenue in the fourth quarter came in at $3.31 billion, slightly short of the consensus estimates of $3.34 billion.
Free cash flow was $718 million in the period, down 34% YoY and above the consensus estimates of $454.8 million.
The company reported gold production of 1.20 million oz, down 0.2% YoY and in line with the analyst expectations. For the full fiscal year, Barrick expects gold production in the range of 4.20 million to 4.60 million oz, compared with the consensus projection of 4.4 million.
The company expects capital expenditure in the range of $1.9 billion to $2.2 billion, while analysts were looking for $2.06 billion.
Barrick gold stock price is up over 30% YTD.
Newmont Corporation (NYSE: NEM) is the leading gold production company in the world engaged in the production of copper, silver, lead, and zinc. The 100-year old company operates through five main segments including North America, South America, Australia, Africa, and Nevada, and now has roughly 31,600 employees and contractors around the world.
Newmont is the only gold company that is included in the benchmark S&P 500 index.
The gold producer recently reported better-than-expected Q4 adjusted EPS results of 78c, compared to $1.06 in the year-ago period and just above the analyst consensus of 77c per share.
Newmont generated $3.39 billion in sales in the period, up 0.3% YoY and beating the analyst expectations of $3.36 billion. Attributable gold production was reported at 1.62 million oz, slightly below the consensus projection of 1.7 million.
The company reported a Q4 free cash flow of $858 million, topping the expected $804.7 million. Adjusted EBITDA was $1.6 billion in the quarter, compared to the consensus estimates of $1.67 billion.
For the full fiscal year, Newmont expects attributable gold production of about 6.2 million oz, missing the consensus of 6.4 million oz. It expects gold all-in sustaining cost per ounce of $1,050.
Newmont stock price is trading 28% in the green YTD.
Summary:
Gold prices have been on the rise due to inflation and Russia’s invasion of Ukraine. This safe-haven commodity could prove to be a valuable asset in the coming year as prices are set to rise even further.
Barrick Gold Corporation and Newmont Corporation are 2 gold stock picks to consider adding to your portfolio.
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