There are reports that Europe might be entering a recession again. With a slowing economy in Europe comes a fear that it could hit the United States, which has a particularly strong dollar right now. To prevent that from happening, the Fed will have to refrain from raising rates on the dollar. By doing this, the strength of the dollar diminishes.
All of this so called doomsday talk is perfect for the gold mark. Gold is an asset people buy when they are afraid that their fiat currency is not going to do well. If Europe really does enter a recession and there’s fear that it will spread, I believe that gold will rise in value.
And it’s all those gold miners that will reap the benefits. Here are two gold companies you should look at if Europe does enter a recession.
Yamana Gold Inc.
Yamana Gold Inc. (TSX: YRI)(NYSE: AUY) is one of my favorite gold stocks on the market right now for a few reasons. The primary one is because it is the perfect example of a value stock. If you look in the dictionary under “value,” you’ll see Yamana. I almost feel like I would be committing robbery if I were to buy this stock because it is priced so inexpensively. Keyword is almost.
This company is also in a position to increase its production and decrease its costs. It recently partnered with Agnico Eagle Mines Ltd. (TSX: AEM)(NYSE: AEM) to buy the Canadian Malartic property. Just how much gold is going to come out of this? It could be quite a bit.
This company is ready to soar and if fear kicks in from Europe, I really believe that it will.
What’s particularly good about Goldcorp is that it is finally seeing returns at the Éléonore mine in Northern Quebec. By 2018, this is expected to return 7,000 tonnes per day. And even then, that’s still not the only mine Goldcorp is opening.
But here’s the real reason I like Goldcorp: It can survive gold prices dropping even further. If prices drop, smaller, more inefficient mines won’t be able to afford their operations and they might sell. If that happens, Goldcorp can swoop on in and get operational mines that it can then turn around and make more efficient.
At the end of the day, if there is a recession in Europe, there is going to be fear and gold companies might make for really good stocks to own then.
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This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.
Fool contributor Jacob Donnelly has no position in any stocks mentioned.