Gold price versus bitcoin
Gold prices remain under pressure as the demand for alternative investments, including equity stocks and bitcoin (ARKW), remain strong in the risk-on environment. The Fed just raised the federal funds interest rate by 25 basis points in its December meeting, as expected, and has forecast three more hikes for 2018.
This outlook was in line with market expectations, and so the Fed’s action itself didn’t add to the pressure already on gold. Still, gold prices are under pressure, and the precious metal is trading close to a five-month low.
While some market participants believe that investors’ rising interest in bitcoin is taking the sheen away from gold, others, including Goldman Sachs (GS), believe that bitcoin isn’t directly reducing the demand for gold. (To read more about gold’s price outlook and its investment appeal compared with that of bitcoin, please read What Can Investors Expect from Gold Prices in 2018?)
Analyst ratings for gold miners
In this series, we’ll see which gold miners analysts are favoring in this volatile gold price environment. We’ll take a look at the top ten miners based on their percentage “buy” ratings from Wall Street analysts and discuss how these mining stocks are performing individually and relatively.
Among major precious metal miners, Wheaton Precious Metals (WPM), Coeur Mining (CDE), and Pan American Silver (PAAS) have garnered the most “buy” recommendations at 92.0%, 78.0%, and 73.0%, respectively. Among the top ten miners, Royal Gold (RGLD), Iamgold (IAG), and First Majestic Silver (AG) rank among the bottom three, with “buy” recommendations at 54.0%, 54.0%, and 50.0%, respectively.
Mining stocks’ implied gains
Among the top three precious metal miners, Coeur Mining has the most upside potential, amounting to 53.2% based on its average target price. PAAS has the upside potential of 43.6%, while Wheaton Precious Metals has an potential upside of 22.6%.
Among the bottom three, IAG has the highest upside potential of 48.8%, while RGLD and AG have lower potential upsides of 12.0% and 10.7%, respectively.
Factors that are driving ratings and implied gains
Notably, WPM’s business model of streaming provides protection to investors during a downturn. Its returns have been consistent compared to its mining peers (GDX) (GDXJ). Coeur’s year-to-date underperformance and positive upcoming catalysts might have encouraged analysts about the stock.
Pan American Silver has shown strong operational performance on a year-to-date basis, and its stock price has outperformed close peers in 2017. Along with other prospects, this performance appears to be motivating analysts about the stock.
Continue reading below for more details, starting with Wheaton Precious Metals.