Gold price performance
Gold prices rose 23% in the first half of 2016, making gold one of the best-performing investments so far this year. Most of the gains in gold are due to its safe-haven appeal.
At the beginning of the year, global uncertainty reinstated gold’s safe haven appeal. Gold strengthened more as the Fed’s tone became dovish on weaker US economic data. The latest catalyst came in the form of the Brexit vote, which led to a strong risk-off sentiment in the market and reinstated gold’s safe haven appeal.
To read more about gold’s direction, please see Is Gold Set to Remain Higher for Longer Post-Brexit?
Gold miners on a tear
This strong gold performance was accompanied by even more robust performance for gold miners. Gold miners (GDX)(GDXJ) are essentially a leveraged play on gold prices, and they tend to magnify the weakness or strength in gold prices. Miners with higher operational or financial leverage tend to outperform others miners when gold prices are on a run. That’s what we’re seeing in the gold market right now.
In this series, we categorize miners into five sub-categories.
- senior gold miners
- intermediate gold miners
- South African gold miners
- royalty and streaming companies
- silver miners
We’ll analyze these miners’ performance year-to-date and the reasons for their divergence. As the graph above shows, Coeur Mining (CDE), First Majestic Silver (AG), Harmony Gold (HMY), IAMGOLD (IAG), and Yamana Gold (AUY) have gained the most.
We’ll also look at Wall Street analysts’ recommendations and ratings for these precious metal miners. It’s important to note that analysts’ estimates usually lag price movements. We see upgrades when stocks have already risen. As for downgrades, they come when a company has already seen lower prices.
That being said, changes in analysts’ estimates are key drivers of short-term price movements. You should keep track of changes in analysts’ estimates because they offer insight into what the market expects from a given company.
We’ll start by looking at analysts’ ratings for senior gold miners in the next part of this series.