The U.S. economy keeps on expanding but not as it should, shedding some doubts on the near-term outlook for gross domestic product growth.
Last week, on Dec 13, we got some negative signs from U.S. retail sales, which is a significant indicator of the U.S. economy as consumer spending represents the largest component of the GDP.
U.S. retail sales increased by 0.2% in November of 2019, which was 20 basis points down from a 0.4% revised growth rate reported in the previous month and below expectations for a 0.5% growth rate.
Year over year, U.S. retail sales marked a 3.3% rise as of November, which missed consensus estimates of 3.4% and was far below the average growth of 4.35% computed over the 27 years from 1993 to 2019.
Weaker economic growth has heightened uncertainty in the financial markets, causing increased demand among wealthy individuals for physical gold and driving the price of the bullion up.
Gold closed at $1,477.90 per troy ounce on Monday, up 14.4% from the average price of $1,291.75 for January 2019 and up 6.3% from the cumulative average price of $1,389.87 for the year to date period. As long as uncertainty persists, the yellow metal will continue to trade higher.
Investments in physical gold are not for everyone due to the elevated price per ounce. Therefore, in order to take advantage from an expected gold bull market, investors may see more profit from buying shares of its publicly traded producers rather than the metal itself.
For the upcoming quarters, I would suggest to maintain portfolio exposure to changes in the price of gold through holdings in Iamgold Corporation (IAG, Financial), the share price of which is targeted to achieve 30.4% growth within 52 weeks.
The Canadian mid-tier miner targets to reduce costs as a result of expected higher ore grades and lower waste volumes in Burkina Faso and plans to raise output from the successful completion of explorations in Suriname.
A series of other operating improvements will help the miner close 2019 with an estimated 765,000-810,000 ounces of attributable gold production at an all-in sustain cost of $1,090 to $1,130 per ounce, including joint ventures.
Iamgold Corporation has an enterprise value-Ebitda ratio of 6.32 versus the industry median of 8.93 and a price-book ratio of 0.59 versus the industry median of 1.39. The first ratio is highly indicated as a valuation metric to use for companies that operate in industries that require sizeable amounts of capital investment, such as the mining industry.
Iamgold closed at $3.39 per share on Dec. 13 for a market capitalization of about $1.58 billion.
Following an 8% decline in the past year through Dec. 16, the share price is now in between the 200-day simple moving average line and the 100- and 50-day SMA lines.
Wall Street issued a hold recommendation rating for Iamgold Corporation.
Disclosure: I have no positions in any securities mentioned.
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