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Gold Investors: How to Position Yourself for Brexit Impact



Which gold miners could gain?

A surge in gold prices would benefit almost all gold stocks. But some have more leverage to gold prices than others. Among senior gold miners, Kinross Gold (KGC) and Yamana Gold (AUY) have shown the most sensitivity to gold prices since the start of 2016.

Among the UK-listed names, Randgold Resources (GOLD) could also present itself as an attractive opportunity. The pound has fallen to its lowest level in three decades. The weakness of the euro against the US dollar is also likely to positively impact Randgold Resources.

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While the Brexit has provided Randgold with tailwinds in the form of higher gold prices and weaker currencies, the company is also operationally sound. Its production levels are increasing, driven by higher grades. Its cost profile is declining over the years. Its free cash flow should enable it to fund its internal growth pipeline.

Among intermediate gold miners, Iamgold (IAG) and Coeur Mining (CDE) have risen the most due to their higher sensitivity to gold prices. Stocks such as Goldcorp (GG), Franco-Nevada (FNV), and Randgold Resources (GOLD) have underperformed the VanEck Vectors Gold Miners ETF (GDX). They, too, have the potential to play catch-up since their fundamentals remain strong.

More leverage?

For more risk-tolerant investors, leveraged ETFs such as the ProShares Ultra Silver ETF (AGQ) and the Direxion Daily Gold Miners Bull 3X ETF (NUGT) provide high leverage to changes in precious metal prices.

But investors should note that while they might multiply gains in the event of an upside in gold prices, the downside is also higher if precious metal prices come under pressure.


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