Thursday saw the price of gold reaching its highest level since early 2013. As a result, investors’ interest in gold stocks soared as they flocked towards Canadian junior gold miners to diversify their portfolio.
Canada’s main stock index TSX also touched a new high on Wednesday, boosted by gains in energy and gold stocks. The materials sector, which includes precious and base metals miners and fertilizer companies, added 0.1% as gold futures rose 0.1% to $1,602 an ounce.
At the time of writing, the price of gold is US$1,620 per ounce, which is up 25% in less than a year. Pundits are now saying a gold price of US$2,000 is likely in the next 12-24 months. Gold hit a record high above US$1,900 per ounce in 2011.
This marks the sixth session in a row in gains for gold futures. Global fears of an economic slowdown in China due to the outbreak of coronavirus are partly responsible for the rally.
But that isn’t the only thing fueling interest in gold stocks. As the Fed reveals growing concerns over rates and the global economy, investors are flocking to sake haven assets like gold.
The rally in the price of gold started in late May 2019 when gold was trading at less than US$1,300 per ounce. A strong move through the summer months took the price to US$1,560 in early September. Traders booked profits over the course of three months, after which gold slipped back to US$1,460.
Following the last move in the price of gold, gold stocks are moving higher, but many miners still sit well below their 2011 highs, and the sector is arguably in much better financial shape.
Barrick Gold (TSX:ABX)(NYSE:GOLD) has gone from being nearly buried under US$13 billion in debt to finishing 2019 with net debt of US$2.2 billion. If gold maintains its recent gains, Barrick Gold could be effectively debt-free by the end of 2020.
Torex Gold Resources is another strong performer – the junior gold miner’s stock rose 5.7% after reporting a strong fourth quarter.
IMC International Mining (IMCX) (IMIMF Stock Report) has been one of the top gold stocks to watch this year. Shares of the Canadian gold miner jumped as much as 100% from January 8 through February 10. After settling down a bit and consolidating to lows of $0.40CAD, the gold stock is back on the move, reaching highs of $0.46CAD so far this week.
Another gold stock that could be worth tracking is that of Kinross Gold (KGC Stock Report). Since Wednesday, shares of Kinross gold stock have shown consistent growth amid bullish gold prices, reaching fresh highs of $5.70 during early morning trading.
Gold miners Agnico Eagle Mines Limited (AEM Stock Report) and Kinross Gold Corp currently back White Gold Corp’s exploration program. The significance of this is what White Gold Corp reported on Thursday.
The combination of concerns for the outlook of the global economy and other economic indicators point that gold’s rally may be due to it serving more as a portfolio hedge than a flight to safety from coronavirus concerns. Either way, there is a strong case for gold’s bullish run.