Alert! Does This Signal Mean it’s Time to Pile Into Gold Stocks?

Gold prices are building momentum right now, which is great news for Yamana Gold Inc. (TSX:YRI)(NYSE:AUY) and other top producers.

| More on:
Gold bullion on a chart

Image source: Getty Images.

The spot price of gold hit a one-month high in trading late last week before suffering a pullback into the middle of this week. The news of a yield curve inversion for the 10-year U.S. Treasury and the 10-year Canadian bond caused a brief bout of panic in North American markets. Unsurprisingly, this resulted in a good day for the yellow metal.

At the beginning of the year. I’d recommended that investors stash gold equities in their portfolios. As 2018 came to an end, markets were in turmoil, and U.S. and Canadian central banks had capitulated on their rate-tightening path. The U.S. Fed and Bank of Canada have only grown more dovish to start 2019, even in the face of a significant stock market rally. The threat of chaos surrounding Brexit negotiations also has investors on their toes in anticipation of potential blowback for the global economy.

Geopolitical shocks and a slowing global economy are both bullish signs for gold, but the key mover going forward is the about-face on interest rates. Gold is in a great position to thrive, especially if oddsmakers are proven correct and central banks go as far as to cut rates in 2019 in response to a slumping economy.

Below are two gold stocks worth considering in the early spring.

Yamana Gold (TSX:YRI)(NYSE:AUY)

Yamana Gold stock has climbed 14.3% in 2019 as of close on March 26. Shares are up 1.1% from the prior year. The Toronto-based miner produced over 940,000 ounces of gold in 2018, which surpassed its original production guidance of 900,000 ounces of gold.

Yamana has disappointed shareholders in recent earnings reports, but the fourth quarter appeared to be a return to form. Revenue per ounce of gold settled in at an average of $1,263 in 2018, which was only up marginally from an equally muted 2017. If the spot price of gold can make a push to $1,400, Yamana will be in great shape in the quarters to come.

Floundering prices and weaker-than-expected earnings have kept Yamana stock in a narrow 52-week range. The stock currently boasts an RSI of 59, which puts it in neutral territory in late March.

Kirkland Lake Gold (TSX:KL)(NYSE:KL)

Kirkland Lake has been a top performer in the mining sector. Shares of the Toronto-based gold producer have climbed 25% in 2019 so far. The stock is up nearly 120% from the prior year.

Kirkland Lake had a fantastic 2018 in which it produced 723,477 ounces of gold — a new record for the company. It is forecasting solid production growth in the coming years. It has targeted production between 740,000 and 800,000 ounces in 2019 and is forecasting up to one million ounces produced by 2021. This top-shelf production combined with higher revenues from rising prices is a perfect storm for Kirkland Lake.

Kirkland Lake stock is hovering around an all-time high, but it has experienced a slight pullback. Its technicals suggest that it is not overbought, as an RSI of 49 puts it in neutral territory. Even still, considering the wealth of discounts in this sector, value investors should be picky with this stock right now and wait for a more favourable entry point.

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

warning or alert

ALERT: Why I’m Buying This Lithium Stock Hand Over Fist Right Now

Lithium Americas Corp. (TSX:LAC) is a lithium stock I’d look to aggressively stack, as it aims to ramp up production…

Read more »

sad concerned deep in thought

TFSA Users: 56% of You Are Making This Huge Mistake

Use the Tax-Free Savings Account to create a portfolio of growth stocks and benefit from outsized gains over time.

Read more »

sale discount best price

3 Remarkably Cheap Stocks to Buy Right Now

These top TSX dividend stocks are trading at big discounts to their 12-month highs.

Read more »

Growth from coins

Got $3,000? 3 Growth Stocks to Double Up on Right Now

Canadian investors who have some cash to spend should look to top growth stocks like MTY Food Group Inc. (TSX:MTY)…

Read more »

woman analyze data

1 Under-the-Radar Dividend Stock to Buy and Hold

Bank of Nova Scotia (TSX:BNS) stock keeps getting cheaper, making it a top value pick for the end of September.

Read more »

tsx today
Energy Stocks

TSX Today: What to Watch for in Stocks on Thursday, September 28

The U.S. quarterly GDP data and Fed chair’s comments about the economy will remain on TSX investors’ radar today.

Read more »

close-up photo of investor Warren Buffett

The Best Warren Buffett Stocks to Buy With $300 Right Now

An investing lessons by Warren Buffett was to buy the dip. The market is giving you buying opportunity with these…

Read more »

man sitting in front of 3 screens programming
Tech Stocks

2 Growth Stocks to Hold for the Next 10 Years

Are you interested in growth stocks? Here are two picks to hold for the next 10 years!

Read more »