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3 Stocks to Target As Risk Returns to the Market

Volatility reared its head in the markets last week and investors felt the pinch. North American markets suffered their worst losses since early 2018, and the week left many wondering whether the choppy conditions would continue into the rest of October. Major indexes in the United States were down in early afternoon, trading on October 15 while the TSX also slipped into negative territory.

In the beginning of October, I’d discussed the frustrating path of gold stocks in 2018. It is befitting of the volatile nature of the asset class that the yellow metal has bounced back during the second major stock market sell-off of 2018. The spot price of gold rose back above $1,200 last week and was up nearly 1% in early afternoon trading today.

Barrick Gold (TSX:ABX)(NYSE:ABX) stock was up 2.71% in early afternoon trading on October 15. Shares have surged 12.2% over the past week and the stock is now up 23% month over month. Barrick recently acquired Randgold Resources to become the largest gold miner in the world. A return to volatility in the stock market could boost the spot price of gold to close the year.

Barrick is still in negative territory for 2018, and the stock could still be an attractive addition given the peaks it has reached in previous gold bull markets.

Yamana Gold (TSX:YRI)(NYSE:AUY) stock was up 2.62% in early afternoon trading on the same day. Shares have jumped 9.6% over the past week. The company is set to release its third-quarter results on October 25. The earnings report may be muted given gold’s poor performance over the spring and summer, but Yamana remains a top target as one of the largest miners in the world. Shares are still down 12.2% in 2018 so far.

Goldcorp (TSX:G)(NYSE:GG) stock was up 1.3% in early afternoon trading on October 15. Shares have jumped 8.9% over the past week. Like its peers, Goldcorp stumbled in the late summer and spiked last week.

The company is also expected to release its third-quarter results on October 25. Like Yamana and Barrick, Goldcorp is yet another industry leader that may be trading at a discount if gold can sustain its current momentum. Shares are down 12.5% in 2018 so far.

Can gold equities keep up this run?

The spot price of gold has been faced with many headwinds in 2018, and that perfect storm may be abetting as we head into the final months of the year. The U.S. economy has been a rock-solid performer this year, but growth is expected to dissipate next year and fall below 2% beginning in 2020. The market reaction to interest rate hikes could give central banks pause in the coming quarters, and the re-emergence of dollar weakness will only be a boon for gold.

No matter the market conditions, it’s usually wise for investors to maintain a small portion of gold holdings in their portfolios. The yellow metal has been hammered since 2017 on a strong U.S. dollar and improved economic conditions, but financial storm clouds are building that could see the safe haven return to prominence.

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

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