Gold just reached a 30-year low and gold stocks are following the trend. Is this a good time to buy?
After a tumultuous year, gold prices look set to hit a three-decade low as outflows reach historic levels and financial analysts continue to predict that the economy will improve. With the stock market showing little signs of slowing down and emerging markets looking relatively strong, gold futures are down almost 30% for the year after 12 consecutive years of gaining prices.
So the question on any investor's mind has got to be: is a thirty-year-low, low enough? Will prices continue to go down or will they start to rebound? It's hard to imagine a world where gold isn't considered precious, but with many gold mining stocks down as much as 50-70%, the stability that was thought to be afforded by gold starts to lose its luster.
Part of the reason gold is down so much has to do with inflation and tapering. The value of gold and the value of the dollar have an inverse relationship. When people are bullish on currencies or equities, the price of gold tends to fall.
But regardless, there have been a few boom and bust cycles in the last 30 years, which means the low gold prices are still pretty unprecedented. So we decided to run a screen for value plays in the gold sector.
Since virtually every stock that's too leveraged in gold is down for the year, it would be hard to build a good screen using financials or valuations – so instead we looked for clues in how these stocks have performed.
We wanted to find some stocks that had fallen a lot (the most in the sector as possible) so we looked for stocks that were down at least 50% for the year. We'd like to think this leaves room for some upside. But we also didn't want to include stocks that seem likely to go out of business any time soon if prices continue to fall.
To hedge against that risk we limited our screen to stocks with a market capitalization over $2 billion – making these all mid-cap stocks. And we only kept those with a price over $5, the bottom price limit used by many traders (if not $10). All of these stocks are up incrementally for the week (although it is only Tuesday). But that also means that these gold stocks are likely gainers if gold prices start to rebound.
Click on the interactive chart below to view stock prices over time.
Do you think now is a good time to invest in gold mining stocks? Use the list below to begin your own analysis.
1. Barrick Gold Corporation (ABX, Earnings, Analysts, Financials): Engages in the production and sale of gold, as well as related activities, such as exploration and mine development. Market cap at $17.09B, most recent closing price at $17.11.
3. Compania de Minas Buenaventura SA (BVN, Earnings, Analysts, Financials): Engages in the exploration, mining, processing, and development of gold, silver, and other metals in Peru. Market cap at $2.82B, most recent closing price at $10.98.
4. Eldorado Gold Corp. (EGO, Earnings, Analysts, Financials): Engages in the discovery, exploration, development, production, and reclamation of gold properties in Brazil, the People's Republic of China, Greece, and Turkey. Market cap at $4.25B, most recent closing price at $3.96.
5. New Gold, Inc. (NGD, Earnings, Analysts, Financials): Engages in the acquisition, exploration, extraction, processing, and reclamation of mineral properties. Market cap at $2.54B, most recent closing price at $5.01.
(List compiled by James Dennin. Analyst ratings sourced from Zacks Invesment Research, all other data sourced from Finviz.)
Analyze These Ideas: Getting Started
- Read descriptions for all companies mentioned
- Access a performance overview for all stocks in the list
- Compare analyst ratings for the companies mentioned
- Compare analyst ratings to annual returns for stocks mentioned
- Real-Time Opinion: Scan the latest tweets about these companies (feed will open in a new window)
Dig Deeper: Access Company Snapshots, Charts, Filings
- Barrick Gold Corporation(ABX, Chart, Download SEC Filings)
- AngloGold Ashanti Ltd.(AU, Chart, Download SEC Filings)
- Compania de Minas Buenaventura SA(BVN, Chart, Download SEC Filings)
- Eldorado Gold Corp.(EGO, Chart, Download SEC Filings)
- New Gold, Inc.(NGD, Chart, Download SEC Filings)
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