Which Gold Stocks Are Looking Attractive in 2019?



Gold miners’ leveraged performances

Gold miners are usually a leveraged play on gold prices. Even in 2018, as gold prices (GLD) fell 1.9%, the VanEck Vectors Gold Miners ETF (GDX) multiplied that loss by falling 9.3%.

The price actions in leveraged gold ETFs, such as the Direxion Daily Junior Gold Miners Bull 3X ETF (JNUG) and the Direxion Daily Gold Miners Bull 3X ETF (NUGT), were more dramatic. JNUG and NUGT saw falls of 48% and 45%, respectively. YTD (year-to-date), however, the price action of gold miners has remained muted.

Until January 25, GLD has returned 1.3% compared to GDX’s return of 0.4%. Gold has underperformed the broader equity markets, with the S&P 500 Index (SPY), the Dow Jones Industrial Average (DIA), and the NASDAQ Composite Index (QQQ) rising 6.3%, 6.1%, and 7.1%, respectively, in the same period.

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Gold miners’ performances

While gold miners’ overall performance has remained weak in 2019, there have been huge variations in the performances of individual miners. Among major miners, Goldcorp (GG), Yamana Gold (AUY), and Agnico Eagle Mines (AEM) have risen 10.2%, 8.9%, and 2.2%, respectively, YTD. On the other hand, Barrick Gold (GOLD), IAMGOLD (IAG), and Newmont Mining (NEM) have fallen 9.5%, 16%, and 4.3%, respectively, YTD.

Which gold stocks look attractive?

While a surge in gold prices would benefit almost all gold stocks, in this series, we’ll try to gauge which stocks look attractive based on their valuation multiples and upcoming catalysts. For the ease of discussion, we’ve categorized precious metals miners into the following five categories based on their key characteristics:

  • senior gold miners
  • South African gold miners
  • royalty and streaming companies
  • intermediate gold miners
  • silver miners

We’ll discuss the valuation multiples of miners from each category with respect to their close peers, and we’ll compare their valuations with their peers’ valuations and their historical averages. We’ll also evaluate how their valuations could move going forward.

Continue to the next article for a look at the valuations of senior gold miners.


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