Yahoo Finance 3 Stocks to Gain as Recession Risk Propels Gold Prices Higher
Gold prices traded above the psychological $2,000 level on Apr 5, and touched intraday highs after a slew of discouraging economic reports sparked recession concerns. This supported the yellow metal’s appeal as a safe-haven investment.
Growth in the U.S. service sector slowed much more than estimated in March. The Institute of Supply Management (ISM) noted that its Services Purchasing Managers’ Index (PMI) slipped to 51.2% in March from February’s 55.1%. Economists had expected the pace of growth in the service sector to slow down to 54.5%. A slowdown in the pace of growth in new orders was primarily responsible for the more-than-expected decrease in growth in the service sector.
On the other hand, the manufacturing sector is in the contraction territory. The ISM’s manufacturing PMI declined to 46.3% in March, its lowest since May 2020. Needless to say, any reading below 50% indicates contraction.
What’s more, the ISM’s index of new orders also dropped to 44.3% last month from 47% in February. The Commerce Department had already stated that orders for factory goods in the United States have already declined for the second straight month in February.
Now, shrinking new orders is mostly associated with the recession, and such concerns have led to bouts of volatility in the stock market lately. But gold is a safe haven, and therefore sees its prices hover near an all-time settlement high amid unfavorable economic conditions.
The June gold futures contract traded at $2,038.40 on Apr 5, not far from its all-time record-high settlement of $2,069.40 achieved on Aug 6, 2020, added the Dow Jones Market Data.
Meanwhile, weakness in the U.S. economy has now compelled the Federal Reserve to press the pause button on further interest rate increases. Fed officials may have raised the interest rates by 25 basis points in their last meeting, however, most market participants expect the central bank officials not to hike interest rates in May. And such a decrease in expectations of a rate hike helped keep gold prices high as well. After all, lower interest rates won’t lead to money flowing out of gold and into high-yielding, fixed-income investments.
And as the bullion metal glitters, gold mining stocks like Barrick Gold GOLD, Kinross Gold KGC and Royal Gold RGLD have a fair chance to gain. These stocks, currently, possess a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks Rank #1 (Strong Buy) stocks here.
Barrick Gold is the largest gold mining company in the world and has mining operations in the United States. The Zacks Consensus Estimate for its current-year earnings has moved up almost 6% over the past 90 days. The company’s expected earnings growth rate for the current year is 18.7%. Its estimated earnings growth rate for the next year is nearly 18%.
Kinross Gold holds major assets in Canada, and the United States, and is primarily involved in the exploration and operation of gold mines. The Zacks Consensus Estimate for its next-quarter earnings has moved up 14.3% over the past 90 days. The company’s expected earnings growth rate for the current year is 45.5%. Its estimated earnings growth rate for next year is 46.9%.
Royal Gold acquires and manages precious metals stream and royalty interests, with a primary focus on gold. The Zacks Consensus Estimate for its current-year earnings has moved up 2.7% over the past 90 days. The company’s expected earnings growth rate for the current year is 9.9%. Its estimated earnings growth rate for next year is 11.9%.
Shares of Barrick Gold, Kinross Gold and Royal Gold have already gained 14.6%, 23.5% and 21%, respectively, so far this year.
Image Source: Zacks Investment Research
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Kinross Gold Corporation (KGC) : Free Stock Analysis Report
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