4 Gold Stocks To Buy As Inflation Rages | The Mesh Report

4 Gold Stocks To Buy As Inflation Rages

The Gold Enthusiast June 14, 2022 Comments Off on 4 Gold Stocks To Buy As Inflation Rages

Stubbornly high inflation is possibly the biggest challenge for policymakers for the year and potentially into 2023. Recently released data indicates that inflation has surged to a 40-year high of 8.6%. While the Federal Reserve is pursuing contractionary monetary policy, real interest rates are likely to remain negative for an extended period.

The Fed’s policy committee will end a two-day meeting on Wednesday by raising interest rates by at least 50-basis points.

Another important reason to be bullish on gold stocks is as follows — There is a possibility of a recession in the United States in 2023. If the probability of recession increases in the next few quarters, the central bank might pause on the rate hikes. This is likely to be bullish for the precious metal.

It’s therefore not surprising that gold has remained relatively resilient even with tightening liquidity. Gold is also supported above $1,800 an ounce due to the geo-political risk factor. With some correction from highs, there are attractive gold stocks to buy at current levels.

Overall, I believe that gold can test new highs in the next 12-18 months. Let’s therefore talk about four gold stocks to buy that are positioned to trend higher as cash flows remain robust.

Ticker Company Current Price
NEM Newmont Corporation $64.65
GOLD Barrick Gold Corporation $20.12
KGC Kinross Gold Corporation $4.24
AU AngloGold Ashanti Limited $16.11

Newmont Corporation (NEM)

From 52-week highs of $82.40, Newmont Corporation (NYSE:NEM) has corrected to current levels of around $65. Current levels seem attractive for accumulation for this 3.28% dividend yield stock.

Newmont has 96 million ounces of gold reserves, which gives the company multi-year production visibility. Further, the company expects to reduce the all-in-sustaining-cost (AISC) to $800 to $900 an ounce over the next few years.

Even if gold trades around $2,000 an ounce, Newmont is positioned to deliver healthy EBITDA margin and cash flows. It’s worth noting that Newmont reported free cash flow of $252 million for Q1 2022. With an annualized FCF potential of $1.0 billion, the company is well positioned to sustain dividends.

Further, the miner reported cash and equivalents of $4.3 billion and net-debt-to-adjusted EBITDAX of 0.3. Therefore, there is ample financial flexibility to invest in growth.

Another important point to note is that Newmont has 91% of assets in the Americas and Australia. Assets in regions with low geo-political risk should add to the valuation premium. NEM stock therefore looks attractive at a forward price-to-earnings-ratio of 20.7.

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