2 Bullish Signs for Gold in 2019

Barrick Gold Corp. (TSX:ABX)(NYSE:ABX) and others will benefit from positive gold price movements that are more likely as economic headwinds build.

| More on:

The spot price of gold was up to nearly $1,250 per ounce in late morning trading on December 4. Gold has seen a resurgence in late November and early December due to several factors. The most recent spike comes on the heels of U.S. President Donald Trump acknowledging that US-China talks could lead to more tariff action in 2019.

Gold equities have seen positive action in the fall.

Barrick Gold (TSX:ABX)(NYSE:ABX) stock has surged 28.8% over a three-month span as of late morning trading on December 4. The stock is still in negative territory for 2018. Barrick released a very solid third-quarter report back in October. Gold production hit 1.15 million ounces in the quarter, reporting revenues of $1.84 billion. Barrick is the largest gold producer in the world after its Randgold acquisition.

Kinross Gold (TSX:K)(NYSE:KGC) stock is up 3.8% month over month. In early November I’d discussed why Kinross was an interesting target due to global developments. The Brazilian election brought to power a party that could boost Kinross operations in 2019 and beyond. In the third quarter, Kinross produced 586,260 gold equivalent ounces and reported revenue of $753.9 million.

Gold producers like Barrick and Kinross have been getting by on low prices since late 2016. A strengthening U.S. dollar has put a cap on gold’s ceiling, but there are bullish signs on the horizon. Rising gold prices in 2019 have the potential to result in massive revenue increases for companies like Barrick and Kinross. Let’s look at two reasons that investors should be optimistic about gold’s outlook in 2019.

A potential pause on rate hikes in the United States

On November 28, U.S. Federal Reserve chairman Jerome Powell spoke at an event in New York and said that the current policy rate of 2-2.25% was “just below” the neutral rate level. This implied that there was a limited need for additional rate hikes. North American indexes soared in response as interest rate anxiety has been a primary driver of the most recent global stock market sell off.

The U.S. dollar showed surprising strength considering the dovish take. A timeout for Fed rate hikes may not blow up the dollar in 2019, but a retreat would have major implications. With that in mind, let’s look at the second reason to be bullish for gold next year.

Anemic global growth heading into the next decade

Goldman Sachs surprised some last month when it projected 1.8% GDP growth in the US in the third quarter and forecast that this would slip to 1.6% in Q4. Goldman stated that the positive impact of tax reform will pass by the second half of 2018, and tighter economic conditions will hinder growth. However, Goldman is confident that the U.S. will stave off recession until at least 2020.

Global growth is also expected to slow in 2019. The Organization for Economic Cooperation and Development (OECD) lowered its forecast for global growth to 3.5% from its original projection of 3.7%. “Recent developments suggest that the global expansion has peaked and is likely to slow over the next two years,” the OECD said in its report.

Slowing U.S. and global growth will put more pressure on policymakers, especially as fundamentals like real wage growth remain in a troubling range. A broad pullback has the potential to push interest rates back down in the coming years, which would be fantastic news for the yellow metal.

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 Investing

rain rolls off a protective umbrella in a rainstorm
Dividend Stocks

Building a $50,000 Portfolio That Can Weather Any Market Storm

This defensive investment portfolio uses three ETFs to ride out any recession.

Read more »

Two seniors float in a pool.
Retirement

Want to Retire Rich? 3 TSX Stocks to Add to Your Portfolio Now

These TSX stocks could deliver above-average returns in the long run, helping you build wealth over time and retire rich.

Read more »

a person watches a downward arrow crash through the floor
Dividend Stocks

Top 3 TSX30 Winners: Understanding the Recent Stock Drop

Three TSX30 winners in 2024 have experienced price drops this year and continues to underperform due to massive headwinds.

Read more »

space ship model takes off
Dividend Stocks

Where to Put $12,000 in Today’s Market for Potential Long-Term Gains

There's no shortage of great investments that can provide potential long-term gains. Here's a look at three stellar options.

Read more »

Hand Protecting Senior Couple
Retirement

Avoid the OAS Clawback: Dividend Strategies Every Retiree Should Know

With a smart dividend strategy, the OAS clawback can be minimized or even avoided entirely for retirees. Here's how.

Read more »

Canadian dollars are printed
Dividend Stocks

How to Use $10,000 to Transform a TFSA Into a Cash Machine

Do you want growth and income? Consider these top investments that offer up monthly income in spades!

Read more »

TFSA (Tax free savings account) acronym on wooden cubes on the background of stacks of coins
Dividend Stocks

Building a $28,000 TFSA Portfolio One Contribution at a Time

Let’s take a look at how you can turn a $28,000 investment in a TFSA into a life-changing fund for…

Read more »

senior relaxes in hammock with e-book
Dividend Stocks

Making Your $25,000 TFSA Investment Work Harder for the Long Term

This strategy reduces risk while still providing a solid return.

Read more »