Gold mining stocks stabilized near support Tuesday after the precious metal regained its shine amid a stockmarket pullback and the commodity's recent ability to reject the closely watched $1,700 level.
"Precious metals found some traction in the wake of a risk-off global trade in equities, official recession labeling for the U.S. economy and because of the market's capacity to reject sub-$1,700 pricing for a second day in a row," Zaner Metals analysts wrote in a research note cited by MarketWatch.
In the longer term, the Federal Reserve's commitment to providing unlimited support as the economy recovers from the coronavirus pandemic continues to place downward pressure on the U.S. dollar, helping lift demand for the yellow metal from foreign currency buyers and those seeking a hedge against rising inflation.
Below, we take a closer look at two of the world's largest gold mining companies as well as an exchange-traded fund (ETF) that holds a portfolio of firms that operate in the gold mining industry.
Barrick Gold Corporation (GOLD)
Toronto-based Barrick Gold Corporation (GOLD) is a leading gold and copper producer operating in North America, South America, Australia, and Africa. The $43.26 billion gold mining giant's bottom line grew 45.5% year over year in the first quarter on the back of rising gold prices, despite a 9% decline in total gold production. Analysts have a 12-month price target on the stock at $29.82, representing a 22% premium from Tuesday's $24.38 close. As of June 10, 2020, Barrick Gold shares offer a 1.19% dividend yield and are trading over 30% higher on the year.
In recent sessions, bullion bulls have defended $22.50, where the stock finds a confluence of support from the 2016 high, the February swing high, and 50-day simple moving average (SMA). Before entering, traders may decide to wait for the moving average converge divergence (MACD) indicator to generate a buy signal by crossing above its trigger line. Those who buy at current levels should set a profit target near multi-year resistance at $39 but cut losses if the stock fails to hold above the June low at $22.13.
Newmont Corporation (NEM)
Newmont Corporation (NEM) produces and markets gold, copper, silver, zinc, and lead globally. Although the 104-year-old gold mining firm's first quarter adjusted earnings fell slightly short of Wall Street expectations, the figure jumped 43% compared to the year-ago quarter thanks to a 20% increase in attributable gold production and robust gold prices. Trading at $57.17, with a market capitalization of $45.88 billion and a 1.8% dividend yield, the stock has climbed 32.47% year to date, outperforming the gold miners industry average over the same period by around 15% as of June 10, 2020.
Newmont shares provide a "buy the dip" opportunity after finding crucial support at $52.50 – an area on the chart that lines up close to the 50% Fibonacci retracement level stretched from the March low to the May high. Swing traders who buy here should anticipate a runup to the 52-week high at $68.84 while managing downside risk with a stop-loss order placed beneath last week's low at $52.33.
VanEck Vectors Gold Miners ETF (GDX)
Traders can gain diversified exposure to gold mining companies by purchasing the VanEck Vectors Gold Miners ETF (GDX), which holds a basket of about 50 firms involved in the global gold mining industry. Trading wise, more than 35 million shares exchange hand per day on an average penny spread, making the ETF suitable for a wide variety of strategies. GDX commands an enormous asset base of nearly $15 billion, issues a 0.56% dividend yield, and has returned 47.57% so far this year as of June 10, 2020. The fund carries a competitive 0.53% management fee.
Over the past three weeks, the ETF's price has pulled back to the $31 level, where it encounters significant support from the top trendline of a previous trading range that formed before the pandemic sell-off. Furthermore, the relative strength index (RSI) sits below 50, giving the fund ample room to move higher before consolidating. Those who open a long position should consider using the 50-day SMA as a trailing stop to let profits run as far as possible. Protect capital with an initial stop placed just below $31.