NGD - Will Gold Prices Hit $1800 Before Q3?
Gold Is Trading At Its Highest Levels Since April
It’s been a tough go for gold stocks over the last few weeks. Since gold prices typically have a bigger directional influence on certain mining stocks, you can clearly see the price of gold struggled in June:
But that doesn’t negate the fact that prices didn’t crumble altogether. For the most part, gold held its support levels in line with the trailing 50 Day Moving Average. Only a few days earlier this month did we see gold drop below that level. Needless to say, the optimism for the stock market mixed with more QE has slowed down the epic gold rally this quarter. In April, prices reached a 7 year high of $1,788.80 but quickly slid back.
On Monday, however, we’ve once again seen gold prices move higher. This trend began late last week. On June 18th, the price tested support at $1,722 and bounced back to close the week at $1,756.20. This sentiment was also in play on June 22 with the price of the precious metal reaching $1,779. The only time this level came close to being tested was late last month.
[Read more] Are Gold Stocks Ready For Their Next Leg?
So what’s happening right now that has gold bugs bullish once again? It doesn’t take too much to see that there are the same fiscal risks in place as was previous to the virus. On top of that, we’ve also started to see a spike in new coronavirus cases. Did we actually see a flattening of the curve? Obviously there are more questions than answers pertaining to that. But while new cases spike, fears that the economy could shut back down have become very real.
Gold Stocks Spike Along With COVID-19 Cases
In a report late last week, Nomura economists weight in on the topic. “While social distancing during March and April helped slow the spread, re-opening activities in a number of states – most notably Arizona, Alabama, Arkansas, South Carolina, North Carolina, Florida and Texas – have coincided with a wave of infections that may be spreading further south and west relative to the early affected states. In that sense, the recent increase in cases represents a “rolling,” as opposed to a second, wave of COVID-19 in the U.S.”
Federal Reserve Chairman Jerome Powell and other central-bank officials have called in recent weeks for more government stimulus to support the economy. In light of this, firms like Goldman are calling for much higher gold prices over the next 12 to 18 months. Goldman Sachs (GS Stock Report) updated its forecast for gold prices. For the 3, 6, and 12-month outlook, the bank expects $1,800, $1,900 and $2,000 respectively. That’s up considerably from the previous forecast of $1,600, $1,650 and $1,800. So when you talk about “gold 1800” we’re no longer talking about Jose Cuervo’s top-shelf tequila.
The biggest question right now is what will this mean for your list of gold stocks in the long run? Obviously the coronavirus put the brakes on progress for many gold mining stocks. Mainly, the reason was based on complying with local government mandates to shut down operations either partially or entirely earlier this year. With things reopening across the globe, the next 2 quarters will be important in my opinion. Essentially, we’re looking to see if gold mining companies were able to weather the storm even in light of possibly higher gold prices.
Top Gold Stocks To Watch
This week we’ve seen a number of gold stocks trade higher. Names like B2Gold (BTG Stock Report), Barrick gold stock (GOLD Stock Report), and New Gold Inc. (NGD Stock Report) were all back in uptrends. B2Gold stock, for instance, came within 30 cents of testing its 52-week highs on Monday.
Another one of the gold stocks to watch on Monday was AngloGold Ashanti (AU Stock Report). Shares have turned around aggressively over the last few sessions. Since last Thursday, AU stock has climbed from lows of $24.08 to a high of $27.74 on Monday. The company restarted its Mponeng Gold Mine operations earlier this month.
In a statement to Reuters, spokesman Stewart Bailey said, “Our aim is a gradual ramp-up to 50% capacity.” The report said it began a phased restart of Mponeng on Monday with four crews on the first shift, just 9% of the normal full complement of 44 crews.