Gold markets continue their bullish run with a major push higher during the trading session on Wednesday. Gold price surged all the way towards the $1825 level rather early in the session, showing a clear break out of the massive barrier underneath.
Analysts have spent months predicting if and when the $1800 level would be reached, but now that the price of gold has cleared it, it is likely that it will continue to be one of the favored trades by institution and retail traders alike. Gold has much further to go ahead of a second wave of COVID-19 wave expected at the end of the year and rising tensions between US and China. Central bank actions, economic uncertainty and a weakened US Dollar are pushing gold prices higher with no end in sight to the looming global crisis.
Gold ETFs have been of particular interest to investors with nearly $40 billion flowed into gold-backed exchange-traded funds in the first 5 months of 2020. Gold ETF net inflows for this time set a new record, exceeding the full year record set in 2016.
As the price of gold rose 17% over the first half of 2020, global gold ETF holdings (in tonnage terms) increased by 25%. Global daily trading volumes reached a record $233 billion per day in March and stood at $156.9 billion per day in June, comfortably above the 2019 daily average of $145.7 billion. By the end of June, gold-backed ETFs held 3,620 tonnes of gold worth $206 billion.
The continuous upward trajectory of gold is good news for Canadian gold miners whose gold stocks are also enjoying a rally due to an increased demand for bullion, new exploration programs and strong balance sheets.
As the onset of the coronavirus brought about an onset of M& activity, we have seen a wave of consolidations and restructuring in the sector. After Kirkland Lake Gold’s (TSX:KL) acquired Detour Gold, Pretivm remains the last single-asset junior gold miner in Canada.
Single mine companies are attractive takeover targets as they are easier to integrate. As M&A activity remains strong, Pretivm will be in the spotlight as an attractive target. Operating the high-grade Brucejack Mine in British Columbia, Analysts expect the company to grow earnings by approximately 20% annually over the next few years.
In addition to established Canadian gold miners like Barrick Gold Corp, Lundin Gold and Agnico who all have ample portfolio of mining operations and have demonstrated consistently good drilling results and returns, there are some new players worth investors’ attention. Junior miner Alamos Gold (TSX:AGI) has been among the top performing gold stocks in 2020. The company’s stock price has gained 28.10% and it is nearing an inflection point. This is a company that has little debt, and with the completion of YD will be entering a period of significant cash generation.
Diversifying your portfolio with some of the top TSX-listed gold stocks and mature and junior gold stocks can provide additional protection against market volatility in the face of the global crisis. It is very important for investors to do their own due diligence when looking at any Canadian junior gold mining companies.