UBS - 3 Top Stocks to Buy as Gold Prices Rise in July 2024
2024-07-12 06:00:00 ET
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Gold prices have surged in 2024 and judging by the latest analyst commentary, this trend is unlikely to stop anytime soon. UBS (NYSE: UBS ) updated its gold price forecasts recently, raising its expectations for the precious metal’s future performance.
The bank’s Chief Investment Officer ( CIO ) now anticipates gold to reach $2,500 per ounce by the end of September, up from the previous forecast of $2,400. Moreover, the year-end projection for 2024 has been increased to $2,600 per ounce from $2,500, with the same target set for the end of March.
Looking further ahead, UBS CIO introduced a new forecast for the end of June 2025, predicting gold will climb to $2,700 per ounce. The revised forecasts are based on three primary factors.
The first driver is the recent softening of U.S. economic data for April, which has led to a change in market expectations regarding Federal Reserve interest rate cuts. Currently, money markets are pricing in approximately 40 basis points of easing in 2024, a notable increase from the 28 basis points expected at the end of April.
The second factor influencing the updated outlook is an increase in the forecast for central bank gold demand in 2024. UBS CIO now expects demand to be between 950 and 1,000 metric tons, an uptick from the previous estimate of 800 to 850 metric tons. This revision follows a report from the World Gold Council , which indicated that central banks purchased a record 290 metric tons of gold in the first quarter.
The third driver is the ongoing geopolitical uncertainty, which UBS believes will bolster the appeal of gold as a hedge. Factors contributing to this uncertainty include the upcoming U.S. election, persistent conflicts in the Middle East and Ukraine, and escalating trade tensions between the U.S. and China.
UBS CIO suggests that any declines in the price of gold are likely to be temporary and recommends buying the metal on dips at approximately $2,300 per ounce or lower.
Barrick Gold (GOLD)
Barrick Gold (NYSE: GOLD ), one of the world’s largest gold producers, benefits significantly from higher gold prices. With extensive operations across North America, South America, and Africa, rising gold prices enhance profitability and cash flow, supporting debt reduction and shareholder returns through dividends and buybacks.
For the last quarter, Barrick Gold reported adjusted earnings per share ( EPS ) that surpassed analyst predictions. The mining giant posted an adjusted EPS of 19 cents, which is not only higher than the 15 cents forecasted by the Street but also shows an improvement from the 14 cents reported in the same quarter last year.
While the company’s revenue experienced a slight year-over-year (YoY) increase of 3.9%, totaling $2.75 billion, it narrowly missed the analyst estimate of $2.76 billion. Despite this, the marginal discrepancy between the reported revenue and the expectations did not significantly impact the overall financial performance of the company.
Alamos Gold (AGI)
Alamos Gold (NYSE: AGI ) is a gold producer with operations primarily in North America.. Higher gold prices enhance its profitability and cash flow, supporting ongoing development projects and expansions. This financial strength allows for increased dividends and strategic investments, bolstering long-term growth and shareholder value.
Bank of America (NYSE: BAC ) recently upgraded shares of Alamos Gold from Neutral to Buy, simultaneously increasing the stock’s price target from $15.75 to $20.00. The upgrade and new price target come in the wake of Alamos Gold’s recent move to acquire Argonaut Gold in an all-share transaction.
The brokerage firm has expressed support for the strategic acquisition, noting that it aligns with Alamos Gold’s focus on low-risk jurisdictions and is expected to bring about significant synergies.
The revised price target to $20.00, equivalent to C$27.25, represents an increase from the previous C$21.75 target, reflecting a more optimistic outlook on gold prices that contributed to the upgraded rating. Bottom line, the brokerage firm suggests that the transaction is poised to enhance Alamos Gold’s growth trajectory and operational metrics.
Newmont Mining (NEM)
Newmont Mining (NYSE: NEM ), the largest gold producer globally, experiences notable advantages from higher gold prices. Operating in diverse regions including North America, South America, Australia, and Africa, elevated gold prices improve its earnings, cash flow, and balance sheet strength, facilitating ongoing investments and increasing shareholder distributions through dividends.
UBS upgraded Newmont Mining stock from Neutral to Buy, with an increased price target to $50 , up from the previous target of $40. The upgrade reflects a bullish outlook on gold prices, with the bank forecasting a 30% increase compared to the current consensus for the year 2025.
The positive view on gold is expected to lead to higher consensus earnings for Newmont. This upgrade comes after Newmont Mining’s shares underperformed against both the gold price and its peers by approximately 60% since 2019.
On the date of publication, Shane Neagle did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines .
On the date of publication, the responsible editor did not have (either directly or
indirectly) any positions in the securities mentioned in this article.
Shane Neagle is fascinated by the ways in which technology is poised to disrupt investing. He specializes in fundamental analysis and growth investing.
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