After falling from a high of $1,900 in 2011 all the way to a low of $1,065 in 2015, there are encouraging sings that gold bullion is mounting a comeback. Gold rose 30% to start 2015, only to retrace some of those gains towards the back half of the year. So far in 2017, the spot price of the underlying commodity is up 11% and, more recently, has crossed over both the 200-day and 50-day moving averages — a technical indicator referred to as the “golden cross” and a sign that bullion may be embarking on an extended bull run….
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After falling from a high of $1,900 in 2011 all the way to a low of $1,065 in 2015, there are encouraging sings that gold bullion is mounting a comeback.
Gold rose 30% to start 2015, only to retrace some of those gains towards the back half of the year.
So far in 2017, the spot price of the underlying commodity is up 11% and, more recently, has crossed over both the 200-day and 50-day moving averages — a technical indicator referred to as the “golden cross” and a sign that bullion may be embarking on an extended bull run.
Yet despite gold’s recent ascent, the Horizons Beta Pro S&P/TSX Global Gold Bull Plus ETF (TSX:HGU), one of the more actively traded gold ETFs, has lagged the comeback, down 10% for the year and down 60% since gold hit its most recent high in August last year.
All this means that those wanting to play the gold angle will probably be best served in the active market, buying individual stocks that are expected to outperform the broader market averages. Kirkland Lake Gold Ltd. (TSX:KL) may be one of the best ways to take advantage of the opportunity.
Kirkland Lake IPO’d back in July 2015 and, despite that the price of gold bullion has fallen over the period since, Kirkland has been a true outperformer, up an incredible six-fold over that stretch.
When Kirkland went public, shares were floated at $2.76 before settling below $2, only to climb to $12.92 as of close August 3.
That means investors who’d plunked down $10,000 back two years ago would see the value of that investment worth an amazing $46,811 today.
Not bad for two years’ “work,” right?
In a market dominated by the likes of mega-cap producers like Barrick Gold Corp. and Goldcorp Inc., Kirkland should appeal to investors searching for a nimbler company with more room to grow.
At a market capitalization of $2.76 billion, Kirkland is not exactly small, but its size pales in comparison to the gold behemoths.
Simply speaking, this suggests there is more room to grow and more low-hanging fruit available for the company to take advantage of as it climbs the ranks.
To be perfectly fair, this story is already playing itself out with the company’s revenue having doubled in Q1 earlier this year on record production of 130,045 ounces.
Not to mention that management recently upped guidance to 530,000-570,000 and guided for lower operating costs in doing so.
Performance of this magnitude is very difficult to ignore, even if you aren’t specifically following a “growth style” in your portfolio.
Should you buy?
Even putting all of the fundamentals aside, Kirkland makes for a timely investment given the sheer momentum behind the stock.
Kirkland shares recently hit all-time highs, and the stock sits comfortably above both its 50-day and 200-day moving averages.
Keep in mind that while you may not have been familiar with this company before now, stocks that rise six-fold in a two-year period aren’t often kept secrets for very long.
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Fool contributor Jason Phillips has no position in any stocks mentioned.