After the precious metal recovered its luster despite a stock market decline and the commodity’s recent ability to reject the widely watched $1,700 level, gold mining stocks steadied close to support on Tuesday.
According to a research note from Zaner Metals analysts cited by MarketWatch, “precious metals found some traction in the wake of a risk-off global trade in equities, official recession labeling for the U.S. economy, and because the market was able to reject sub-$1,700 pricing for a second day in a row.”
Longer term, the Federal Reserve’s promise to continue offering unrestricted support as the economy recovers from the coronavirus pandemic exerts downward pressure on the U.S. dollar, which supports an increase in demand for the yellow metal from those looking to buy foreign currencies and those looking for a hedge against rising inflation.
Below, we examine two of the biggest gold mining corporations in the world together with an exchange-traded fund (ETF) that owns a portfolio of companies involved in the gold mining sector.
Corporation Barrick Gold (GOLD)
Leading gold and copper producer Barrick Gold Corporation (GOLD), with operations in North America, South America, Australia, and Africa, is located in Toronto. Despite a 9 percent fall in overall gold output, the $43.26 billion gold mining giant’s bottom line increased 45.5 percent year over year in the first quarter because to higher gold prices. The stock’s 12-month price target by analysts is $29.82, or a 22 percent premium over Tuesday’s finish of $24.38. The dividend yield on Barrick Gold shares, which is 1.19 percent as of June 10, 2020, is nearly 30 percent more than it was at the same time last year.
Bulls in the metal have defended $22.50 in recent sessions, where the stock finds support from the 2016 high, the February swing high, and the 50-day simple moving average (SMA). Trades may be entered after waiting for the moving average convergence divergence (MACD) indicator to pass above its trigger line and give a buy signal. Those who invest now should aim to make a profit at or around the multi-year resistance level of $39, but they should limit their losses if the stock is unable to stay above its June low of $22.13.
Corporation Newmont (NEM)
Global production and distribution of lead, zinc, copper, silver, and gold are handled by Newmont Corporation (NEM). The 104-year-old gold mining company’s first quarter adjusted earnings were slightly below Wall Street estimates, but they were still up 43 percent from the same period last year owing to strong gold prices and a 20 percent rise in attributable gold output. As of June 10, 2020, the stock has a market value of $45.88 billion, a dividend yield of 1.8 percent, and was trading at $57.17. Year to date, it has increased 32.47 percent, above the 15 percent growth of the gold miners industry as a whole.
After establishing important support around $52.50, Newmont shares present a “buy the dip” opportunity. This price point on the chart corresponds closely to the 50% Fibonacci retracement level extended from the March low to the May high. Swing traders should expect a rise to the 52-week high at $68.84 and manage downside risk by placing a stop-loss order below last week’s low at $52.33.
Gold miners VanEck Vectors ETF (GDX)
By purchasing the VanEck Vectors Gold Miners ETF (GDX), which owns a basket of around 50 businesses active in the worldwide gold mining sector, investors may have diversified exposure to gold mining companies. The ETF is appropriate for a wide range of trading techniques because to the daily average penny spread volume of over 35 million shares. As of June 10, 2020, GDX had a massive asset base of approximately $15 billion, paid a 0.56 percent dividend yield, and had returned 47.57 percent this year. The fund charges a competitive management fee of 0.53 percent.
The top trendline of a prior trading range that had developed before the pandemic sell-off has provided the ETF with considerable support near the $31 level throughout the course of the last three weeks. Furthermore, the fund has plenty of potential to rise before stabilizing because the relative strength index (RSI) is below 50. To maximize earnings, those who initiate a long trade can think about utilizing the 50-day SMA as a trailing stop. Protect your money by placing a first stop right below $31.
