Why I Believe Gold Will Rally, and 3 Stocks That Stand to Benefit the Most

NASDAQ: GOLD | Barrick Gold Corporation  (BC) News, Ratings, and Charts

GOLD – While treasuries and tech stocks bounced back, the rest of market continued its decline Friday. David Cohne sees inflation as a major risk for investors and believes that gold will start a new rally. This should benefit mining stocks such as Gold Corporation (GOLD), Newmont Corp. (NEM), and Kinross Gold Corporation (KGC).

Stocks ended Friday mixed as both the S&P 500 and Dow Jones Industrial Average ended the day in negative territory, while tech stocks pared losses to finish the week. Investors are still digesting yesterday’s sharp sell-off in both the stock and bond markets. While all three indexes posted positive gains for the month, the Nasdaq posted its worst weekly loss since October.

Inflation is on every investor’s mind, which is why we are seeing Treasury yields rising. Gold has also been trending down as of late, but I believe that will change soon. And when it does, I think it will drive up prices for gold mining stocks such as Barrick Gold Corporation (GOLD), Newmont Corp. (NEM), and Kinross Gold Corporation (KGC).

Before I tell you why I believe why now is a great opportunity to invest in gold, let’s take a more in-depth look at how the market has performed over the past week.

Market Commentary

This week has been a wake-up call for investors. We saw a surge in bond yields that led to a sell-off in both treasuries and stocks Thursday. The yield on the 10-year note briefly soared above 1.6%, its highest level in twelve months. This created weakness in growth stocks, especially the Nasdaq, as it plummeted 3.5%, its worst day since October.

The rise in rates was likely due to many factors, including improving economic outlook, rising inflation concerns, and a historically weak 7-year Treasury note auction. Treasuries stabilized today with the 10-year note finishing with a 1.4% yield, but the S&P 500 and Dow Jones were still negative on the day. The Nasdaq was able to rebound for a 0.5% gain.

Market Outlook

As we’ve seen over the past few months, the stock market is rallying on the expectation for a robust economic recovery. Add to this the expected $1.9 trillion relief bill, an extremely low Fed rate, and an expanding Federal balance sheet, and you have all ingredients for inflation. 

Gold has historically risen in inflationary periods, but that hasn’t been the case so far. In fact, gold just posted its worst monthly loss since 2016. What’s going on? 

The belief is that investors are concerned that the Federal Reserve will raise rates to combat this expected inflation. But I think they’re wrong. The Fed has all but written in the sky that they have no intention of raising rates until next year or the year after. 

I believe that at some point, in the not too distant future, the Fed will reassure the markets that it won’t be raising rates anytime soon and signal that it might take measures to keep yields down.  When an announcement like this is made, gold prices should rally significantly.

However, until this happens, yield prices might continue to rise, and if that happens, gold could continue to fall.  

Also, with both the Fed increasing their balance sheet and more fiscal stimulus, we will continue to increase our massive debt. I see this as a significant positive for gold prices, as high debt levels have shown a strong correlation with higher gold prices. This is why I am recommending my three top gold mining stocks below.

Barrick Gold Corporation (GOLD)

GOLD is one of the world’s largest gold producers, operating mines in North America, South America, Australia, and Africa. The company had a great 2020 with a record free cash flow of $3.4 billion, achieving zero net debt and increasing gold resources year over year. The company has also been able to improve its balance sheet as well.

The company should gain on its new management team’s ability to extract significant value from its vast portfolio of assets. A focus on the highest-quality mines should generate more free cash flow per share. In addition, GOLD will also benefit from higher gold prices and its recent Nevada joint venture with NEM.

The stock has an overall grade of B, translating into a Buy Rating in our POWR Ratings. The company also has a Value Grade of B, indicating that the stock is trading below its value. This is confirmed with a trailing P/E of 11.57 and a forward P/E of 13.33. GOLD also has a Quality Grade of B as its current ratio is quite high at 4.5. We also grade GOLD based on Growth, Momentum, Stability, and Sentiment, which you can find here.

GOLD is the #17 ranked stock in the A-rated Miners – Gold industry. You can find other top stocks in that industry by clicking here.  

Newmont Corp. (NEM

NEM is the world’s largest gold producer. The company also produces its fair share of copper. It has a healthy balance sheet, strong free cash flow, and an impressive pipeline of production projects. Its joint venture with Barrick Gold will benefit not only that company but NEM as well. The joint venture is expected to generate $500 million in synergies.

The company’s acquisition of Goldcorp should also increase cash flow as NEM is poised to unlock value at many of Goldcorp’s assets. It should also gain from projects such as the Tanami expansion, Yanacocha Sulfides, and Ahafo north. 

NEM is rated a Buy in our POWR Ratings system. Like GOLD, NEM has a Value Grade and Quality Grade of B. NEM is currently underpriced with a forward P/E of 15.29 and an EV/EBITDA of 7.9. The company has $5.8 billion in cash as of the most recent quarter, compared to only $551 million in short-term debt. For NEM’s other grades (Growth, Value, Momentum, Stability, and Sentiment), click here.

NEM is ranked #14 in the same A-rated industry as GOLD.

Kinross Gold Corporation (KGC)

While not as big as GOLD or NEM, KGC is no slouch. The company operates mines and focuses its greenfield and brownfield exploration in the Americas, West Africa, and Russia. KGC has delivered value to its shareholders due to its status as a low-cost gold producer. In its most recent quarter, the company had record gold output.

The company was able to expand its U.S. production by acquiring assets from GOLD. KGC has even been able to extract more output from these assets. It should see further growth from development projects, expanded production at its existing mines, and extending the life of its older mines. Future growth should come from its Tasiast mine, which has a large gold deposit.

KGC has a grade of B, or Buy rating in our POWR Ratings system. It has a Value Grade of B, which makes it an attractive stock. With a trailing P/E of 6.17. it even has a more attractive valuation than GOLD and NEM. According to the StockNews Price Target feature, the stock has an absurd 89.43% upside potential based on its average price target.

The company also has a Quality Grade of B, with $1.2 billion in cash and total liquidity of $2.8 billion as of the end of last year. You can check out KGC’s other grades (Growth, Momentum, Stability, and Sentiment) by clicking here. KGC is ranked #10 in the A-rated Miners-Gold industry.

Want More Great Investing Ideas?

9 “MUST OWN” Growth Stocks for 2021

How to Ride the 2021 Stock Market Bubble

7 Best ETFs for the NEXT Bull Market

5 WINNING Stocks Chart Patterns


GOLD shares . Year-to-date, GOLD has declined -18.04%, versus a 1.73% rise in the benchmark S&P 500 index during the same period.


About the Author: David Cohne


David Cohne has 20 years of experience as an investment analyst and writer. Prior to StockNews, David spent eleven years as a Consultant providing outsourced investment research and content to financial services companies, hedge funds, and online publications. David enjoys researching and writing about stocks and the markets. He takes a fundamental quantitative approach in evaluating stocks for readers. More...


More Resources for the Stocks in this Article

TickerPOWR RatingIndustry RankRank in Industry
GOLDGet RatingGet RatingGet Rating
NEMGet RatingGet RatingGet Rating
KGCGet RatingGet RatingGet Rating

Most Popular Stories on StockNews.com


:  |  News, Ratings, and Charts

Bull Run or Bull S#*t?

The S&P 500 (SPY) has impressively broken out above 4,000. However, it seems that ONLY large caps are moving higher while smaller stocks are actually in the red. Why is this? And what does it mean for the future health of this bull market? Read on below for the answers…

:  |  News, Ratings, and Charts

3 Shipping Stocks Rated Strong Buy

Shipping stocks are buoyant as the global economy begins its rebound from the economic effects of the COVID-19 pandemic. We think ZIM Integrated Shipping Services (ZIM), Matson (MATX) and Global Ship Lease (GSL) are three companies that are well positioned to benefit from a sector resurgence and, as such, warrant a closer look now by investors. Let’s evaluate these names more closely.

:  |  News, Ratings, and Charts

Top 10 Growth Stocks

Let me prove beyond a shadow of a doubt that we are in the midst of a stock market bubble. Even better, let me explain why stocks (SPY) will rise for another 12-24 months so you can ride it higher and then parachute out at the peak. And just for good measure I will share my top 10 stocks for today’s market. Read on below for more...

:  |  News, Ratings, and Charts

Avoid These 3 Cathie Wood Stocks in April

Cathie Wood’s contrarian investment strategy may not be ideal for short-term, risk-averse investors with limited funds because most of Wood’s bets require a considerable holding period. So, we think Wood favorites Shopify (SHOP), Spotify (SPOT), and Zillow (Z), which could witness a pullback in the near term, are best avoided now.

:  |  News, Ratings, and Charts

Top 10 Growth Stocks

Let me prove beyond a shadow of a doubt that we are in the midst of a stock market bubble. Even better, let me explain why stocks (SPY) will rise for another 12-24 months so you can ride it higher and then parachute out at the peak. And just for good measure I will share my top 10 stocks for today’s market. Read on below for more...

Read More Stories

More Barrick Gold Corporation (BC) (GOLD) News View All

Event/Date Symbol News Detail Start Price End Price Change POWR Rating
Loading, please wait...
View All GOLD News