Gold Stocks Soaring: Still Time to Buy?
Gold stocks are ramping up, and investors are already raking in cash. But only very few are really paying any attention.
Most of America is wrapped up in the Trump drama. Trump said this... Trump said that... And that's quite unfortunate for them.
Because while the left and right have been squabbling with each other over what's “fake news” or whatever, the price of gold has been creeping up. And we've been pulling in the profits.
Not fake news...
|VanEck Gold Miners ETF||VanEck Junior Gold Miners ETF|
But gold stocks aren't necessarily soaring right now due to rising commodity prices, or even speculation of even higher gold prices. They're actually going wild based on earnings.
A Quick Look Back to 2016
The fourth quarter of 2016 was brutal for gold and gold stocks. Gold prices started to decline in August after reaching nearly $1,400/oz. Then, following the surprise election, the price of gold really took a hit, taking the yellow metal back down to $1,130 an ounce.
The decline of prices starting in August and the Trump election was a one-two punch in the gut for gold stocks. And they oversold. But here's what everyone missed...
In 2015, the price of gold averaged $1,160 an ounce. Despite the decline in prices ending the year, gold prices averaged 8% higher at $1,250 an ounce in 2016. And this has translated into more positive year-on-year revenue and earnings than Wall Street was expecting.
On Wednesday aftermarket, mining giant Barrick Gold (NYSE: ABX) reported its 2016 adjusted net earnings more than doubled year-on-year. Earnings per share went positive, from –$2.44 to $0.56.
ABX closed over 6% higher yesterday on the news.
Meanwhile, Goldcorp (NYSE: GG) also took net earnings into positive territory. Goldcorp finally got rid of its goodwill impairment, bringing the company's balance sheet back into the black.
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Shares of GG also closed over 6% higher yesterday.
Some majors, including Kinross Gold (NYSE: KGC) and Yamana Gold (NYSE: AUY), slightly missed analyst earnings expectations, but still reported very encouraging earnings data.
Both Kinross and Yamana were in the red for the year. But Kinross reported a net loss of $104 million ($0.08 per share), compared to a net loss of $985 million ($0.86 per share) for FY 2015. And Yamana reported a net loss of $291 million ($0.31 per share) compared to a net loss of $1.7 billion ($1.80 per share) in 2015.
Agnico Eagle Mines (NYSE: AEM) has had the least amount of share success based on earnings. AEM missed analyst EPS targets by $0.08. But it reported a six-fold increase to net income to $158.8 million ($0.71 per share), compared to net income of $24.6 million ($0.11 per share) in 2015, which is fantastic.
So should you be a buyer?
Maybe not right this second.
As I mentioned, the price of gold averaged $1,250 an ounce in 2016. Gold prices have been creeping back up to those levels, but have yet to crack that level this year. And large investors are going to be hesitant until they see +$1,250 gold.
For the past several weeks, I've been telling subscribers of my Secret Stock Files service to “get greedy” with gold stocks leading up to this earnings season. But now my message is “get smart.”
If you've seen a big gain in your gold stocks recently, take a profit. That's why you bought the stock in the first place. The market is buying. I want to be selling.
However, I don't expect to be selling very long. While I do think gold prices could see some resistance at $1,250/oz., I believe 2017 will be a breakout year for the yellow metal.
So if you've seen a significant short-term gain, take it. But get ready to jump right back in. Because gold is going to take us on a fast, wild, and profitable ride this year.
Until next time,
In his early 30s, gold and natural resource investor Luke Burgess managed to do something most traders never achieve in a lifetime. After being bullish on gold starting in 2004, he exited all of his precious metal positions just eight weeks prior to the correction in gold prices beginning in October 2011… the exact top of the market. But after watching gold and the natural resource market continue to suffer month after month, Luke jumped back into the game and is more bullish than ever.
As an editor at Energy & Capital, Luke’s analysis and market research reaches hundreds of thousands of investors everyday. Luke is also the investment director of Angel Publishing’s new Secret Stock Files. newsletter, which helps investors leverage the future supply/demand imbalance that he believes could be key to a cyclical upswing in the hard asset markets. For more on Luke, go to his editor’s page.