For as long as stock exchanges have existed, precious metals have been a benchmark for security. Now, as uncertainty mounts in the markets, and even the most stable of asset classes prove vulnerable to an increasingly fearful sentiment among investors, it would appear that gold and silver could yet again provide the safe haven that stockholders inevitably turn to.
Though gold prices were wavering last week, ending the last week of May fairly flat, it’s likely that investors will follow the same old route they usually do when things get tough – by investing in precious metals insulated from more volatile asset types. If what some analysts predict comes true and the markets grow more turbulent as the year progresses, gold and silver stocks very well could surge in the latter half of 2019.
Newmont Goldcorp (TSX:NGT)(NYSE:NEM)
Up 4.2% in the last five days, this freshly merged giant in the precious metals and mining space is enjoying the flight to quality that is so predictable in a spooked market. Indeed, the stock has been climbing, more or less, since the middle of May, and will likely to continue to do so as investors seek out places of safety as the year progresses.
An expected earnings growth rate of 40.4% over the next one to three years puts Newmont Goldcorp front and centre on the growth investment radar. While a trailing 12 month P/E of 76.43 times earnings and P/B of 2.6 times book do suggest an overpriced ticker, Newmont Goldcorp’s healthy balance sheet, solid track record, and forward annual dividend yield of 1.69% add up to a sound purchase overall.
Eldorado Gold (TSX:ELD)(NYSE:EGO)
A very low P/B such as Eldorado Gold‘s 0.2 times book can sometimes suggest one of two things: either this stock is attractively undervalued or there’s an underlying issue. Up 20.62% in the last five days, at first glance, Eldorado Gold looks alarmingly like a surging stock with not enough assets. Let’s break that down.
With solid Q1 results detailing output growth spread across its sites in Turkey, Canada, Greece, Romania, Serbia and Brazil, assets clearly aren’t an issue here, with enough growth to satisfy a precious metals investor that their money is in good hands. Indeed, an expected uptick in earnings over the next three years of 76.3% should be reason enough to include Eldorado Gold on a top stock list for growth in the precious metals space.
The bottom line
Although investors should take care to select healthy, growing companies in the metals and mining space, pundits can expect a flight to quality if other asset classes take a further battering later in the year. With plenty of opportunities for oil stocks to take a hit and some banking stocks falling out of favour after missing estimated growth rates, gold and silver (even if their prices grind lower) are likely to emerge as safe havens, thereby driving up the share prices of select companies.
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Fool contributor Victoria Hetherington has no position in any of the stocks mentioned.