HomeMost PopularInvestingGold Fever: Mining Stocks Gleam as Precious Metal Nears All-Time High

Gold Fever: Mining Stocks Gleam as Precious Metal Nears All-Time High

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Golden Glitter

The recent surge in gold prices has set the stage for the metal to potentially reach an unprecedented peak. Amidst a climate of rising interest rates, gold has emerged from the shadows as a beacon of stability for investors seeking shelter from market uncertainty. The bullion, with its exceptional endurance, flexibility, and conductive properties, holds an allure not just for jewelry but also as a safety net for preserving wealth in turbulent times. Year to date, gold has outshone most commodities with a striking climb of about 13%.

Gold’s Bearish Reputation

Although gold has occasionally yielded inferior returns compared to stocks over extended periods, it boasts remarkable periods of remarkable outperformance. For instance, in the decade culminating in August 2011, gold demonstrated a staggering 562% hike – an average annual escalation of almost 21%. In the same period, the S&P 500 managed only a meager 30% total return, inclusive of dividends.

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A Shaky Hedge: Gold’s Battle Against Inflation

Gold’s role as a safeguard against inflation came into question in the past year. Despite a surge in inflation rates, gold remained relatively flat, casting doubts on its credentials as an inflation hedge. However, a swing in the course of the U.S. dollar – once robust but now in a retreat – has provided a turnaround. The dollar, amid escalating interest rates, peaked in 2022 against a basket of currencies, but is now set on a downward trajectory as rate cuts loom on the horizon.

The United States severed ties with the gold standard in 1971, and despite intermittent bouts of potency, the dollar has been on a long-term descent since then. As the U.S. grapples with mounting debt and deficits, the dollar has been bearing the weight of this financial strain.

Gold vs. Dollar: A Tale of Inverse Correlation

The inverse relationship between gold and the dollar is crucial to comprehend. Gold serves as a shield against a waning dollar, retaining wealth and sustaining purchasing power as the dollar’s dwindling trend persists. This unique dynamic has earned gold its status as a store of value and a refuge from the crumbling fiat currencies.

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Gold’s Ascent to Glory

The ongoing decline of the U.S. dollar presents a pivotal advantage for gold’s trajectory. Hovering on the cusp of a momentous breakthrough, gold appears poised to surpass the all-time high of $2,089/oz in August 2020. An article in the Financial Times recently highlighted, “Central banks are scooping up gold at the fastest pace since 1967, with analysts pointing to China and Russia as significant purchasers, signaling an intent to diversify reserves away from the dollar.”

Golden Prospects for Mining Stocks

The mining industry stands to reap the rewards of escalating gold prices. The Zacks Mining – Gold industry group currently holds a rank within the top 32% among approximately 250 industries. This elevated industry ranking augurs well for outperformance in the market over the next 3 to 6 months.

The industry ranking wields substantial influence, with historical analysis indicating that roughly half of a stock’s future price appreciation can be attributed to its industry grouping. The top 50% of Zacks Ranked Industries has outperformed the bottom 50% by more than 2 to 1. Notably, stocks nestled within the top industry clusters have a greater likelihood of success. The promising earnings metrics for this industry further underscore its potential.

Zacks Investment Research

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One such stock in the limelight is Alamos Gold AGI, a company engaged in precious metal acquisition, exploration, and extraction in Canada and Mexico. With a focus on gold and silver deposits, the company operates three mines in North America.

AGI, a Zacks Rank #2 (Buy) stock, has consistently surpassed earnings estimates over the last four quarters, delivering an average earnings surprise of 25.57% during that period. The stock is currently surging, registering nearly 45% growth year-to-date.

Shining Earnings Outlook

Analysts tracking AGI are in alignment, revising 2023 EPS estimates upward by 23.26% over the past 60 days. The Zacks Consensus Estimate now stands at $0.53/share, signaling an 89.3% potential growth compared to the previous year.

Zacks Investment Research
Image Source: Zacks Investment Research

Golden Opportunities

As the U.S. dollar retraces its steps from its previous robust phase, gold is destined for a potential breakout, reminiscent of its outstanding performance from 2001 to 2011. The prime avenue to capitalize on this surge is through gold mining stocks. With the support of the experts at Zacks, you will be primed to seize the opportunity by identifying top-performing stocks such as AGI.

Zacks Names “Single Best Pick to Double”

From thousands of stocks, 5 Zacks experts each have chosen their favorite to skyrocket +100% or more in months to come. From those 5, Director of Research Sheraz Mian hand-picks one to have the most explosive upside of all.

It’s credited with a “watershed medical breakthrough” and is developing a bustling pipeline of other projects that could make a world of difference for patients suffering from diseases involving the liver, lungs, and blood. This is a timely investment that you can catch while it emerges from its bear market lows.

It could rival or surpass other recent Stocks Set to Double like Boston Beer Company which shot up +143.0% in little more than 9 months and NVIDIA which boomed +175.9% in one year.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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