Gold stocks have proved from time to time, to offer the best investment opportunities in times of rising geopolitical tensions as well as well as soaring global economic concerns. Such stocks have always acted as a reliable safe haven, in addition to offering investors a healthy dose of diversification.
The gold price was on a roller coaster early in the year as it topped highs of $1350 amidst soaring geopolitical tension pitying the U.S and North Korea. While the tensions have cooled off in recent months resulting in a major price pullback, the bullion price could soon rally as trade wars pitying the U.S China and the European Union continue to evoke fear in the market.
Gold is poised to deliver solid returns in 2018 given the recent price pullback that has to provide investors an opportunity to bet on its long-term uptrend. Instead of investing in gold indexed exchange, traded funds or purchasing the metal outright, some stocks continue to offer an exciting investment opportunity in anticipation of gold price rallying.
Guyana Goldstrike Inc. (OTCMKTS:GYNAF)
Little known Guyana Gold Strike is one such stock that might be worth paying close attention to in anticipation of gold prices rallying after the recent pullback. The young company is currently advancing its lead Marudi Gold Project which has an active mining license. The project consists of about 13,500 hectares and is located in Southern Guyana.
Last month the company announced that its geological team had uncovered quartzite-metachert (host rock for gold mineralization) in the first three trenches in the Marudi gold project. Presence of gold at the three trenches should complement existing mineralization. The discovery also validates the company’s ongoing exploration program in the project.
The company should be able to complete exploration works and kick-start mining operations given that its balance sheet recently received a major boost. Zijin of China has confirmed a $3.475 million financing that is to be used for work in on GYA’s Marudi gold project in Southern Guyana.
The company has also confirmed it is working on generating drill targets for an upcoming diamond drill program having scheduled a geophysical survey of the entire property.
The stock has started showing signs of trading higher after stagnation early in the year. Over the past two months, the stock has rallied by more than 50% an indication of improving sentiments in Wall Street.
Barrick Gold Corp (USA) (NYSE:ABX)
Barrick Gold Corp (USA) (NYSE:ABX) is a no-brainer as a top gold stock. In addition to being a gold mining leader in terms of size, the company boasts of low operating costs, a feat that has allowed it to post stellar financial results in recent years.
The company generated stellar financial results, in the fourth quarter of 2017, thanks to its low cost and robust production pipeline. The company has in the recent past embarked on a cost-cutting drive as it continues to slash debt from the balance sheet.
Barick Gold also boasts of solid free cash flow holdings which has seen it continue to offer dividends to shareholders. In 2016, the company’s FCF holdings stood at $1.5 billion. While Free Cash flow holdings did take a hit 2017, all indication is that the same will tick higher in 2018 according to the company’s guidance. The company’s dividend yield currently stands at 0.88%.
In the First quarter, the company reported a strong operating cash flow of $507 million and free cash flow of $181 million.
There is no doubt that Barrick Gold has underperformed the market over the past one year. However, over the past three months, the stock has started showing signs of trading higher after bottoming out from lows of $12 a share. With the stock currently trading at the $13 a share handle, it needs to rise and stabilize above the $14 a share to affirm the emerging uptrend.
One of the reasons why Barick Gold seems like an attractive play has to do with the fact that it boasts of an earnings multiple of 16.5, which is below what the industry is trading now. Unlike in the past, the company has tackled its debt debacle nicely eliciting positive ratings from major credit agencies.
Royal Gold, Inc. (USA) (NASDAQ:RGLD)
Royal Gold, Inc. (USA) (NASDAQ:RGLD) is without a doubt the golden child of the industry. Even as the price of Gold continued to edge lower in recent months, Royal Gold has shown signs of leadership as it have continued to flirt with record highs in the market. It might only be a matter of time before the stock registers a new record high especially on the price of gold bottoming out after recent sell-off.
The rally being experienced in Royal Gold has to do with the investments that the company has made in recent years, which appears to have strengthened its sentiments among investors. The full impact of the investments should be felt once the price of Gold ticks higher.
The precious metals streaming and royalty company has strengthened its production capacity of gold and silver. Unlike the other two, the company operates under a different business model. Royal Gold finances gold mining companies with cash up front for the right to buy gold and silver at reduced rates.
The company locks in gold and silver holdings at reduced prices and offloads them once their prices ticks higher. It thus does not come as a surprise that the company has been able to deliver 17 years’ worth of annual dividend increase helped by good margins it has accrued over the years.
Royal Gold has successfully added large streaming deals of operating mines, which are expected to strengthen its free cash flow further. That said the company should be able to pay exciting dividends in addition to stock appreciation expected, as Gold prices bounce back after recent sell-off.
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