KL - Russia Is Selling More Gold Than Oil; What Does That Mean For Stocks?
Will This Signal The Next Leg For Gold Stocks?
Gold prices are fluctuating a bit more wildly this week. One day we’re not worried about the coronavirus, the next day it’s “the end of the world”. But with earnings season in the works, investors are shifting focus to the numbers. Bank earnings have kicked things off giving more uncertainty than anything right now in my opinion.
“Despite some recent positive macroeconomic data and significant, decisive government action, we still face much uncertainty regarding the future path of the economy. However, we are prepared for all eventualities as our fortress balance sheet allows us to remain a port in the storm,” said CEO Jamie Dimon.
But something else is going on right now that macro traders are also noting. Russia exported more gold than gas in the second quarter of 2020 for the first time in almost 30 years. Gold sales to foreign buyers came in at $3.6 billion in April and May alone, business daily RBC reported.
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Citing figures from Russia’s federal customs service — ahead of an estimated $3.5 billion in gas sales for the full quarter — this was the first time since at least 1994 that gold exports have topped gas sales, Maxim Khudalov of the Analytical Credit Rating Agency told RBC.
Will Gold Continue Shining In 2020?
Gold exports also jumped significantly, coming in 14 times higher in April and May 2020 than for the same two months last year. Furthermore, Russia’s gold-oil imbalance isn’t the only thing standing out to some analysts. Morgan Stanley cited that the oil-gold ratio on a global scale is worth watching. The ratio between oil and gold illustrates how many barrels of oil are needed to buy an ounce of gold.
“The oil-gold ratio has historically been a poor indicator of future oil prices,” Morgan Stanley’s Martijn Rats and Amy Sergeant said in a research note published Monday. “However, it is interesting at its extremes.”
What’s more is that Commerzbank analyst Carsten Fritsch wrote, “Gold has regained the $1,800 mark this morning. This is evidence once again that price slides are viewed as buying opportunities and are thus only short-lived. This also suggests that prices will tend to continue rising.”
As we’ve seen, the price of gold slid back to around $1,790 earlier in the session on Tuesday. But as Fritsch noted, gold ended up bouncing back above $1,800 rather swiftly.
What Does This Mean For Gold Stocks?
Considering that gold stocks are in lockstep with the price of gold, it’s worth noting trends among equities. Are gold stocks worth watching or is it all about physical gold right now? To understand that, let’s look at a few gold stocks and observe the current trends.
Barrick Gold Stock
Shares of Barrick Gold (GOLD Stock Report) slid steeply over the last few sessions. On July 9th, Barrick broke back above $28 a share for the first time since May. But shortly thereafter, the price went through a 3.5-day downtrend to lows of $25.95. I say 3.5 because on the 4th day – being July 14 – Barrick gold stock price reversed course and ended up bouncing back more than 2.25%.
In general, GOLD has held onto most of its gains from the second quarter breakout so far. Additionally, it has traded with the 50-Day Moving Average acting as a pivot (mostly as a level of support). Since the start of the year, the gold stock is up nearly 40%.
Kirkland Lake Gold Stock
Similar to Barrick, Kirkland Lake Gold (KL Stock Report) has made attempts to reverse the recent downtrend. On July 9th, KL stock reached a new 2020 high of $48.22. Shortly after that, the gold stock went into a 3.5-day funk.
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On Tuesday, Kirkland Lake Gold stock price hit a low of $43.35 during the first 30 minutes of the trading session. However, since then, the price has reversed course by about 1.3% as of the time of this writing. At the end of June, Kirkland re-issued guidance for 220.
Among other items, the company expects production of 1,350,000 – 1,400,000 ounces. It also anticipates improved unit costs, lower expected sustaining capital expenditures, and higher target growth capital expenditures. This is expected to result from new growth projects at its Detour Lake Mine. Unlike Barrick, Kirkland Lake shares are relatively flat from the start of the year.
Kinross Gold Stock
Comparatively speaking, Kinross Gold Stock (KGC Stock Report) has performed admirably this year. On Monday, Kinross shares reached a new 52 week high of $7.86. As gold prices dipped on Tuesday, so did shares of KGC. However, by the early afternoon, Kinross Gold stock price bounced back by more than 4%. On Thursday, July 30, 2020 at 8:00 a.m. ET Kinross will hold a conference call and audio webcast to discuss its Q2 results. In the mean time, the gold stock has held itself firmly above its 50-Day Moving Average. Since the start of the year, KGC has jumped by more than 55%.
Yamana Gold Stock
Yamana Gold stock (AUY Stock Report) also mirrored the same trend as Barrick and Kirkland Lake. Over the last week, AUY shares reached new 52-week highs of $5.73. However, shortly after, the slide began. On Tuesday, Yamana Gold stock price reached a low of $5.26. However, during the mid-day session, shares have managed to rebound by roughly 3%. This week the company announced preliminary second-quarter 2020 results. Gold production was reported at 164,141 ounces and silver production was 2.01 million ounces.
Total gold equivalent ounce production during the quarter was 183,582 GEO. Overall production and production from most mines also exceeded plan and the production for the quarter implied in Yamana’s annual guidance. As with most of the names on this list of gold stocks, Yamana has enjoyed a general uptrend for the year with the 50 Day Moving Average acting as support for the most part. Since the beginning of 2020, Yamana shares have climbed by more than 30% to date.