Could a U.S.-North Korea Breakthrough Sink Gold Stocks?

An agreement between the United States and North Korea could drive down prices for Goldcorp Inc. (TSX:G)(NYSE:GG) and others.

| More on:

In the summer of 2017, the spat between the United States and North Korea took centre stage and proved a boon for precious metals prices. Geopolitical events have been a key mover not just for precious metals, but also for oil in recent weeks. Gold breached the key $1,350 threshold in early September. Prices have once again been influenced by geopolitical events in the wake of heightening tensions between the key powers involved in the Syrian Civil War.

However, prices have been subdued after North Korea announced that it would suspend its nuclear missile testing program. This was heralded as an early victory by U.S. president Donald Trump, who has signaled that North Korea is ready and willing to denuclearize. However, in statements to the Workers Party of Korea, Kim Jong-un has said that the tests are no longer needed, as North Korea had completed work on a viable nuclear deterrent.

The extent of North Korea’s nuclear capabilities amount to guesswork at the current stage. Some analysts see recent ICBM tests as evidence that North Korea is capable of delivering a nuclear warhead to the entire U.S. mainland. Others have expressed skepticism over the range of North Korea’s ICBMs.

In the eyes of South Korean and U.S. negotiators, the suspension of the missile program has the potential to pave the way for de-nuclearization and even a normalization of relations between North and South Korea. With NAFTA talks making significant progress, could a breakthrough agreement with North Korea bury gold this spring?

Goldcorp Inc. (TSX:G)(NYSE:GG) stock has climbed 12.8% in 2018. However, the stock fell 0.88% on April 23. Gold production exceeded guidance in 2017, and Goldcorp has established itself as one of the best-performing gold miner equities on the TSX so far this year.

Alamos Gold Inc. (TSX:AGI)(NYSE:AGI) fell 1.29% on April 23, and shares have dropped 15.6% in 2018 so far. The stock has plunged 32% year over year. In 2017 Alamos gold produced a record 429,400 ounces of gold and reported record revenues of $542.8 million. The company marked the third consecutive year that guidance had been achieved.

Barrick Gold Corp. (TSX:ABX)(NYSE:ABX) is a Toronto-based company that is engaged in the production of gold and copper. Shares are down 8.8% in 2018 so far but have climbed 2.8% month over month. In the first quarter, Barrick reported net income of $158 million, which was down from $679 million in Q1 2017. However, adjusted earnings rose to $0.15 per share, which beat analyst expectations.

Barrick has scaled back production and made an effort to dramatically cut down its debt load. Higher prices allowed the company to make up ground in spite a 20% drop in gold production in the first quarter, as revenues fell 10% year over year to $1.79 billion.

Easing tensions on the Korean Peninsula could generate downward pressure for gold ahead of what is usually a slow period in the summer months. This means gold equities are likely to be a gamble for investors as we look ahead to the month of May.

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 Ambrose O'Callaghan has no position in any of the stocks mentioned.

More on Metals and Mining Stocks

Arrowings ascending on a chalkboard
Metals and Mining Stocks

If This Fast-Rising Stock Isn’t Yet on Your Radar, it Should Be

This stock is up 44% in the last year and climbing, and yet there is even more to come with…

Read more »

Super sized rock trucks take a load of platinum rich rock into the crusher.
Metals and Mining Stocks

Is Agnico Eagle Mines a Buy in July 2024?

Although quite a few gold stocks are worth looking into for their dividends, the less-than-modest capital-appreciation potential can be a…

Read more »

Gold bars
Metals and Mining Stocks

The Best Gold Stock to Invest $1,000 in Right Now

Want to invest in precious metals? Here's the best gold stock to buy right now, and it isn't a traditional…

Read more »

A worker wears a hard hat outside a mining operation.
Metals and Mining Stocks

1 Canadian Mining Stock Worth a Long-Term Investment

This mining stock has a huge future ahead of it, especially as copper surges in demand around the world. And…

Read more »

People walk into a dark underground mine.
Metals and Mining Stocks

How to Turn Your TFSA Into a Gold (or Copper) Mine Starting With $10,000  

These two top stocks can turn any TFSA into a gold mine -- or a copper mine, if you really…

Read more »

Safety helmets and gloves hang from a rack on a mining site.
Metals and Mining Stocks

1 Canadian Mining Stock to Buy and Hold Forever

Canadian investors can consider gaining exposure to quality mining stocks such as Wheaton Precious Metals in June 2024.

Read more »

A stock price graph showing growth over time
Metals and Mining Stocks

Why Cameco Stock Soared 23% This Year

Cameco stock continues to ride high on strong supply/demand fundamentals and growing momentum in the nuclear industry.

Read more »

growing plant shoots on stacked coins
Stocks for Beginners

1 Copper Stock to Buy as Copper Prices Shine

The price of copper continues to climb, and more copper production is on the way for this top stock up…

Read more »