Which Gold Stocks?

Commodities | Jun 28 2019

The first part of this story was originally published as part of Weekly Insights on Friday, 28 June 2019, under the title "Gold Stocks: Winners & Losers". See Rudi's Views on the website.

This follow up contains additional information from stockbroking analysts releasing research updates after the first story had been written.

As the price of gold has broken out on further central bank policy easing, stockbroking analysts are assessing what has already been priced in, and which gold stocks still offer great opportunity.

Which Gold Stocks?

By Rudi Filapek-Vandyck

Share prices of AUD gold producers in Australia have been flying high as investors woke up to the fact bond yields are once again retreating into negative territory (inflation-adjusted) and central bankers are getting ready to become more dovish, having already abandoned their hawkish bias earlier this year.

As per always, a rejuvenated gold price -both priced in USD and AUD- has pulled the eternal gold bulls out of the shadows of financial markets. One gold bull last week predicted $20 for Northern Star ((NST)) shares should not be considered impossible, and neither is $100 per share for Newcrest Mining ((NCM)).

Ahem.

What is seldom highlighted is that same gold sector locally is home to some serious capital destruction for investors who picked the wrong stocks in the year past.

Which is why Bell Potter's sector update last week was such a refreshing exercise. The analysts felt compelled to highlight the spectacular wipe-outs (their terminology) that have equally characterised the gold sector domestically, including significant share price falls for:

-Gascoyne Resources ((GCY))
-Dacian Gold ((DCN))
-St Barbara ((SBM))
-Blackham Resource ((BLK))
-Eastern Goldfields ((EGS))
-Artemis Resources ((ARV))

For investors who'd still like exposure, while also avoiding the worst possible outcome from investing in the sector, Bell Potter has nominated Top Picks Pantoro ((PNR)) and Regis Resources ((RRL)).

****


Analysts at Credit Suisse express the view that, while gold priced in AUD has surged to record highs this month, the rally in gold producers' equities has nevertheless generated stretched valuations all-around.


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