- Gold stocks have come off as gold prices have levelled off following the early days of the Russian war with Ukraine
- Fundamental Research Corp analysts think inflation will be supportive of strong gold prices, say Newmont looks like good value among the super majors
- Materials and energy indexes up as metal demand promises return
Welcome to which major gold miner are you?
Where would you rather go on holiday, the African Savannah or Australia’s red centre?
Who would you … sorry we can’t keep the schtick up much longer.
The point is there’s a choice to be made at the very top of the gold industry if you want the strongest exposure to gold prices you can get — America’s Newmont or Canada’s Barrick.
Formerly the joint owners of Kalgoorlie’s Super Pit and now JV partners in the world’s largest gold JV in the world at their combined Nevada operations, Newmont and Barrick stand head and shoulders above the rest of the industry when it comes to sheer scale.
Fundamental Research Corp head of research Sid Rajeev and equity analyst Dushan Ratkovic recently took a look at the duelling banjos of gold stocks to assess which looked better coming out of a month of falling gold prices.
According to FRC, the outlook for gold — currently trading at US$1828/oz having touched over US$2000/oz in the wake of Russia’s invasion of Ukraine — is looking positive.
That’s all driven by inflation and money printing.
“We have a positive outlook on gold prices as inflation is likely to be persistent through the year, despite rising rates, due to high energy prices, and as U.S. M2 money supply is up 42% since the onset of the pandemic,” they said.
“As we are expecting stronger gold prices, we are expecting a 15% bump in sector valuations.
“Barrick and Newmont’s shares are down ≈13% from their highs last month, offering attractive entry points.”
While Barrick has doubled its dividends to increase its yield to 3.6% against Newmont’s 3%, FRC says Newmont is a better short term bet.
“Being the largest gold producer, NEM is likely to continue to command a higher premium relative to other miners,” the analysts said.
“In the past 12 months, NEM has outperformed gold, and the VanEck Gold Miners ETF (NYSE: GDX). NEM’s return/risk ratio was also higher than gold and GDX.”
Miners and energy stocks lead the pack
Materials and Energy indexes were two of the standout sectors on the ASX today after metals prices recovered overnight.
The trigger appeared to be a potential easing of Covid restrictions in Shanghai, where cases are now not being seen outside of quarantine.
The materials sector was up 1.12% led by some of the big boys including iron ore and lithium miner MinRes (ASX:MIN), Fortescue (ASX:FMG), diversifieds Rio Tinto (ASX:RIO) and South32 (ASX:S32) and South African gold bull AngloGold Ashanti (ASX:AGG).
Across the major resources indexes the ASX 200 resources (XJR) was up 1.47%, while the All Ordinaries Gold Index rose 0.55% to continue its recovery from a 3 month low last week.