As Gold price fall from 5-week high, will gold stocks trade under pressure this week?

By Staff Writer / June 12, 2021 / Article Link

Futures for Canada's main stock index fell on Wednesday on weakness in gold prices. Gold prices hovered near the key $1,900 per ounce level, helped by a weaker dollar and U.S. bond yields. Spot gold was up 0.1% at $1,899.28 per ounce, as of 0059 GMT. Prices have risen 0.5% so far this week.

Commodity prices traded weak for the week except Crude oil. Increasing inflation in the United States, coupled with rising labor costs, continue to be the main reason behind investors hedging a proportion of their portfolios by investing in precious metals. As analysts expect real interest rates to remain in historically low territory due to the Fed’s ultra-loose monetary policy, gold is expected to benefit in the long run.

Bullion prices traded under pressure during the week after gold prices fell from five weeks high on risk-on sentiments. Analysts expect gold prices to trade sideways to up in the coming week with gold resistance pegged at $1940 per ounce and support at $1850 per ounce.

Given this backdrop, we junior gold mining stocks are a Buy for investors looking to diversify.  Torex Gold Resources Inc. (TORXF - Get Rating) and Argonaut Gold Inc. (ARNGF - Get Rating) are two mining stocks that may deliver solid returns in the coming months.

TORXF is a Canadian junior gold miner with holdings in the Moleros Gold property in Mexico. The company primarily focuses on its two mines in Mexico. It is also expanding its interests in the renewable energy industry after entering an agreement with renewable energy producer Scatec. Under the agreement, TORXF will build an 8.5-megawatt solar plant on it Moleros property. TORXF has a $1.18 billion market cap.

With revenues of $231.20 million in the first quarter, that marked a 34.4% year-over-year increase. Earnings from mine operations increased 255.9% from the prior year quarter to $99.30 million. In addition to this, TORXF has been taking active steps to reduce its debt burden and strengthen its balance sheet. With the junior gold miner being debt free as of March, analysts expect TORXF’s EPS to rise 7% year-over-year to $1.83 in 2021. These factors contribute to an overall A rating, which equates to Strong Buy.

Another promising mining stock is that of Argonaut Gold Inc. (ARNGF). The gold miner has three mines in Mexico, one in the United States and one in Canada. It has a $839.98 million market cap and an ISS Governance Quality Score of 1, indicating negligible governance risk.

ARNGF’s revenues increased 58% year-over-year to a record $105.30 million in the first quarter thanks to record quarterly gold production of 59,704 gold equivalent ounces. Its gross profit nearly doubled from its year-ago value to $27.60 million with net income and EPS improving 382% and 280%, respectively.

ARNGF has an overall B rating, which translates to Buy.