EQX - Are Gold Stocks Heading For New Highs This Week?

May, 10 2020 02:46 PM Equinox Gold Corp

Is The Price of Gold Set For New Records This Decade?

You can’t argue with the fact that we are in unprecedented times. Obviously, gold stocks and the price of gold have benefited greatly. But where does that leave precious metals in the future? Some analysts at places like Bank of America and Citi all expect gold to make new records within the next 18-24 months. But other market technicians are setting their bar much higher.

Citing previous gold price booms, Gold Predict LLC’s AG Thorson explains that gold “could exceed $10,000 this decade”. While pricing like that has been more akin to bitcoin prices, his justification is similar to BofA, Citi and many other gold bugs.

“After a 10-year bull market in stocks, the next asset shift is unfolding before our very eyes. That, combined with the 2019 breakout in gold, confirms the next decade should heavily favor precious metals and tangible commodities. Our Basic Metals Portfolio was designed to navigate these times with minimal investor stress…I do not think prices will break above $2000 without consolidating first, but we are in unprecedented times, and you never know. I expect gold to hit $8500 – $10,000+ later this decade.”
AG Thorson, Senior Financial Analyst, Gold Predict LLC

What’s more is that the government and Federal Reserve could already be planning to indirectly help gold again. The multi-trillion dollar stimulus that has become somewhat of a new norm is pulling out all the stops. The goal is to combat anything that would resemble another financial crisis. But given the base case, while this band-aid could fix things for now, what picture does it paint for our monetary system in years to come?

Will Gold Stocks Reach News Highs This Week?

Volatility has played a big role in the market this quarter. Despite record unemployment not seen since the great depression, stocks are actually reflecting positive sentiment. In fact, NASDAQ just went positive for the first time after the 2020 sell-off, this month.

There’s another scheduled speech coming from Fed Chair Jerome Powell to discuss the FOMC’s appetite on interest rates. Several FOMC officials have voiced opposition to negative interest rate policy. But the central bank has a history of capitulating to dovish expectations priced by the bond market. This is when we could start to see another bout of volatility for the precious metal. Needless to say, gold prices won’t be the only focus for investors. They’ll also be looking for gold stocks to buy.

But what if the coronavirus finds a solution? That’s definitely becoming a focus for those looking to justify the safe-haven argument right now. However I think Washington has done a fantastic job of giving another reason to look at gold: the U.S./China trade war.

“In times of crisis, global rivalries tend to intensify rather than abate. The coronavirus crisis has led to a further deterioration in the already chronically bad relations between China and the US.”
The Economist Intelligence Unit (EIU) added in a note in May

Even the President Trump has cast a bit of doubt on the future of a U.S./China trade resolution. “Nobody else ever made a trade deal with China, because they couldn’t do it, because China wouldn’t do it, because China had a one-way street to rip off the United States. We were losing $500 billion a year, five hundred,” Trump said Friday. “And so I’m very torn, I have not decided yet, if you want to know the truth.”

Will These Be Gold Stocks To Buy or Avoid This Week?

That brings us to the conversation about which gold stocks to watch. While many have reported earnings, some are expecting a bit of a rougher road in the near term. Several mining companies have either revised or canceled 2020 guidance in light of the last 2 months of shut downs. However, it hasn’t put a halt to investors’ appetites to gain exposure to gold through gold stocks.

A 641% “Problem”?

Newmont gold stock (NEM Stock Report) has been a force to reckon with, in 2020. Despite falling to lows of $33 in March, NEM stock not only recovered but reached new 52-week highs this month. With all-time highs still sitting above $70, there’s still a little way to go for the gold stock.

However, with a strong earnings report, Newmont gold stocks remained in a bullish trend to close out its first full week of May. Newmont Corp.’s quarterly profit spiked 641% from a year ago as asset sales, higher production and surging gold prices boosted the company’s bottom line.

“Our robust balance sheet provides us with significant financial flexibility to continue allocating capital where it is needed most during this time of uncertainty, while maintaining our industry-leading returns to shareholders,” Newmont CEO Tom Palmer said in a statement. Newmont produced 1.5 million ounces of gold during the first quarter, up 20 percent year-over-year, at an all-in cost of $1,030 an ounce. But will these strong results raise the bar too high for later this year?

Equinox Gold Stock Rallies On Power Play In Brazil

Other gold mining stocks like Equinox gold stock (EQX Stock Report) hasn’t made a new 2020 high but it has strongly recovered from March’s pullback. Shares of EQX stock have jumped from lows of $4.63 to highs of $9.18 this month. The high for 2020 still sits above $10. Last week the company announced a positive preliminary economic assessment for the development of an underground mine. This was at the company’s 100% owned Aurizona Gold Mine in Brazil.

Equinox said the underground mine could be operated concurrently with the existing open-pit mine and has the potential to deliver an additional 740,500 oz of gold, $1 billion in revenue and $204 million in after-tax net cash flow over a ten-year mine life at a base case gold price of $1,350 per oz.

Christian Milau, CEO of Equinox Gold, stated: “This PEA demonstrates the substantial opportunity for both mine life extension and increased annual gold production at Aurizona through development of an underground mine. With the potential for expansions to the current open-pit, additions of other near-surface resources and further opportunities for Piaba underground resource expansion at depth and along strike, Aurizona is expected to be a long-life cornerstone asset for Equinox Gold.”

What About A Gold ETF?

Aside from investing in physical gold or individual gold stocks, some investors seek a bit more diversity and maybe even a little passive action. A gold ETF could be something to look at. When it comes to these, however, it’s important to understand what the gold ETF is actually investing in and if there’s any physical gold involved as well.

You’ll also want to understand if the ETF is betting on a bullish or bearish take on gold prices. For instance, a popular gold ETF among day traders has been the Direxion Daily Gold Miners Index. The bull side of the coin can be found by looking at NUGT and the bear is with DUST.

According to its overview, “The Direxion Daily Gold Miners Index Bull (NUGT Report) and Bear 2X Shares (DUST Report) seek daily investment results, before fees and expenses, of either 200%, or 200% of the inverse (or opposite), of the performance of the NYSE Arca Gold Miners Index.** There is no guarantee the funds will meet their stated investment objectives,” furthermore, “These leveraged ETFs seek a return that is 200% or -200% of the return of their benchmark index for a single day. The funds should not be expected to provide two times or negative two times the return of the benchmark’s cumulative return for periods greater than a day.”

Some of the top names in the ETF’s include Newmont gold stock, Barrick gold stock (GOLD Stock Report), Franco Nevada (FNV Stock Report), Wheaton Precious Metals (WPM Stock Report) and Kirkland Lake gold stock (KL Stock Report). As of May 8, NUGT closed at $72.67 relatively flat on the day and DUST finished the week at $29.45 slightly higher than where it opened.

Company Name:	Equinox Gold Corp
Stock Symbol:	EQX
Market:	NYSE
Website:	equinoxgold.com

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