Gold Prices Soar: Which Stocks Do Analysts Favor?

Gold prices have risen substantially since March. In this article, we’ll see which gold stocks analysts like the most in the rising gold price environment.

Due to COVID-19, uncertainty and fear have been rising in the market. To combat the impact of the demand slowdown, central banks have embarked on a money printing overdrive.

Gold prices rise

The value of currencies will likely decline. As the money in circulation rises without any output to show for it, the inflation also rises. Both of these scenarios are positive for gold. Analysts, including Bank of America, J.P. Morgan, and UBS, are also recommending gold to investors. Many hedge funds, including Elliott Management, Caixin Associates, and Dymon Asia, have been betting on gold. To learn more, read Gold Prices: Undervaluation, Smart Money Piles Up.

The SPDR Gold Shares (NYSEARCA:GLD) has returned 19% in the last two months, while the VanEck Gold Miners ETF (NYSEARCA:GDX) has compounded these returns and gained 75%.

Gold stocks multiply gold’s gain

Gold stocks are a levered play on gold. They amplify gold’s return either way. In this scenario, investors might want to know which gold stocks are analysts’ favorites. We have analyzed the top four stocks that have the highest “buy” ratings from analysts.

Analysts’ favorite gold stocks

Kirkland Lake (NYSE:KL) ranks first with 91% “buy” ratings and 9% “hold” ratings. The target price implies a potential upside of 16%. In the first quarter of 2020, John Paulson also added Kirkland to his fund. The gold miner’s first-quarter production rose 42% year-over-year. In April 2020, Bank of America initiated coverage on the stock with a “buy” rating and a target price of $42. A Bank of America analyst thinks that Kirkland is a “low-cost growth story.” RBC Capital also maintained its “outperform” rating on Kirkland in April.

Agnico Eagle Mines and Newmont

Agnico Eagle Mines (NYSE:AEM) is next with 85% “buy” and 15% “hold” ratings. In May, CIBC’s Anita Soni reiterated her “outperform” rating and target price of 74 Canadian dollars for the stock. BMO Capital increased Agnico Eagle Mines’ target price from 54 Canadian dollars to 60 Canadian dollars. The firm maintained its “outperform” rating for the stock. The gold miner should return to free cash flows going forward since its high Capex phase is ending. Agnico Eagle Mines is also one of the best-managed companies in the gold mining space.

Newmont Mining (NYSE:NEM) has 75% “buy” and 25% “hold” ratings. The company announced that it would increase its quarterly dividend from 14 cents to 25 cents per share in April. Currently, most of the companies in other sectors cut their dividends. Citi and Deutsche Bank raised their respective target prices for Newmont Mining stock in May. According to TheFly, a Citi analyst discussed Newmont Mining. The analyst said, “Management has a multi-year track record of optimizing assets and dividend increases are very positive in terms of messaging and offering a premium to holding physical gold.”

Barrick’s turnaround impresses analysts

Barrick Gold (NYSE:GOLD) is fourth with 71% “buy” and 29% “hold” ratings. On May 7, Deutsche Bank raised Barrick’s target price from $25 to $34. Deutsche Bank analyst Chris Terry kept his “buy” rating on the stock. He thinks that Barrick’s performance in the first quarter of 2020 was a “standout within the industry in light of the COVID-19 context.” The gold miner generates significant free cash flow. The company reduced its net debt drastically. Barrick Gold’s scale and diversification are also positives for the stock.