Goldman Sachs: Recommendations to Play a Gold Bull Market


Apr. 3 2018, Published 10:27 a.m. ET

Goldman Sachs: Positive on Fresnillo and Centamin

As we discussed in the previous part of this series, Goldman Sachs (GS) has turned positive on gold after almost five years. The firm also named two related stocks that are expected to benefit from gold’s ascent. 

Goldman Sachs mentioned that in this inflationary environment, investors would do well to put their money in stocks giving consistent dividends and free cash flow. The firm has shortlisted miners Fresnillo (FRES.L) and Centamin (CEY.L) based on these criteria.

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Lower costs and free cash flow

Kitco reported Goldman Sachs’ stance that in an inflationary environment and while looking for good gold companies, it’s important to consider the firms that can combat rising inflation while keeping its costs low. Goldman Sachs added that it’s key to look at “companies that can ramp up returns.”

Fresnillo stock has fallen ~12.0% since it released its results in February 2018. Goldman Sachs believes that this sell-off is premature, adding that Fresnillo’s reduced capital expenditures should lead to increasing free cash flow. It noted that this trend would eventually make way to the shareholders.

Goldman Sachs also likes Randgold Resources (GOLD), Sibanye Stillwater (SBGL), Polymetal, and Polyus Gold.

Miners piggybacking on gold

As gold prices recently benefited from the safe-haven bid following the trade war fears, the miners also rallied. This much-awaited rally in gold miners was led by Yamana Gold (AUY), Kinross Gold (KGC), and Agnico Eagle Mines (AEM) in the senior and intermediate miner (GDXJ) space. For the week ended March 23, 2017, Yamana Gold, Kinross Gold, and Agnico Eagle Mines gained 9.2%, 6.1%, and 6.1%, respectively.


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