Hold on to those gold stocks. That’s the message this week, as the yellow metal continues its climb to record highs. Today we’ll take a quick look at some of the best stocks to either get you started or build larger positions in. But first let’s examine just how high gold prices could climb in the latter half of 2020.
How high could gold climb in 2020?
BofA Securities is calling US$3,000 gold. It’s quite the prediction, and definitely at the bullish end of the scale. The call is based on a number of factors that, it can be argued, aren’t necessarily all that reliable. Among them are interest rates, fiscal spending, and a reflating economy. None of these are necessarily a given.
Other factors could also put a dent in gold prices, not least of which would be the rollout of one or more vaccines. A significant vaccine breakthrough from a relevant biopharma outfit could cause gold prices to retreat. With a number of outfits working on trials, there is a strong chance for some good news.
Still, it cannot be said that gold hasn’t experienced a strong bull run so far in 2020. And it’s likely to continue, since the market forces currently at play are showing few signs of letting up.
According to BofA Securities: “Continued fiscal spending as governments are mending the damage from COVID-19, backstopped by central banks, means that interest rates will remain low, at the same time as the economy reflates.”
While this certainly makes for a rose-tinted appraisal of the situation, the corollary that such a market supports higher gold is valid. Not that this year’s growth in commodity prices in unwelcome. Indeed, a comeback in metals prices is contributing to a stronger loonie.
Meanwhile, the U.S. just injected a bit of extra misery into Canadian industrials. It’s almost as though the Trump administration is trying to make sure gold breaks that $3,000 mark. By slapping 10% tariffs on another Canadian commodity — aluminum — a new wave of American protectionism is sure to inject further instability into the markets. The likely outcome is that safe havens will get pushed even higher this year.
Top stocks to build positions in
Key names to buy for gold upside in the near future include Wheaton Precious Metals, Kirkland Lake Gold, Barrick Gold, and Franco-Nevada. The latter is an appealing play for the strictly low-risk investor. As a streamer, Franco-Nevada cuts out a lot of the operational risk inherent in a stock portfolio laden with producers. The dividend yield investor could alternatively stash shares in Newmont at 1.4%.
As the record gold run continues, names such as Franco-Nevada could see further gains this year. This low-risk growth stock satisfies a range of investment strategies. Earnings growth is in the 35% range over the next three years — a significant rate of climb given the market. 280% total returns could reward the investor who hangs onto shares until the middle of the decade. In the meantime, a small dividend is on offer.
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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 Victoria Hetherington has no position in any of the stocks mentioned.