After the U.S. Federal Reserve increased a key interest rate by 0.25%, and forecasted three more rate hikes in 2017, gold lost $8 per troy ounce on the markets to $1,134.60 per ounce from Wednesday's close of $1,142.60.
Source: Kitco.com
Last week, gold closed at $1,131.60 per troy ounce on the London Bullion Market, down 2.1% or $29.80 per troy ounce since Thursday's close of $1,126.95.
Source: Kitco.com
The story is not different on the Comex. On Dec. 16, gold futures closed up at $1,136.65, a 0.61% increase from the previous close of $1,163.70 per ounce of gold, but they are still far below the prices of a couple of months ago, marking a negative period for the Comex as well.
The average price ranges between a high of $1,217.35 per ounce and a low of $1,123.90 per ounce, with a difference of $93.45 per ounce of gold.
Even though the price of gold fell hard since the beginning of November, gold mining stocks are not trading below their real values, says John Bridges, an analyst at JP Morgan. Bridges sees buying opportunities in the gold stock industry since their prices may bounce back any time soon riding the wave of “the Street’s euphoria about a Trump administration.”
Bridges sees wider variations in the share price of Barrick Gold Corporation (ABX, Financial) and Kinross Gold Corporation (KGC, Financial) because they are more volatile than gold.
Other gold mining stocks such as Newmont (NEM, Financial) and Agnico Eagle Mines Ltd. (AEM, Financial) should feel the effect of changes in price of gold much less.
Concerning another Barrick Gold peer, Goldcorp Inc. (GG, Financial), HSBC’s analyst said to Barron's that the company “remains in show-me mode as it works under new CEO Dave Garofalo to meet its new targets and prepares its longer term plans that will be released in January.”Â
The analyst also expressed his preference for two other gold stocks that have been overlooked by investors recently, B2Gold (BTG) and Eldorado (EGO, Financial).
Last week Barrick Gold closed at $14.28, up 28 cents from the prior close, with 28,360,166 shares traded on the NYSE. The gold stock lost 18.82% since the beginning of November. The analyst average target price is $21.41, while the gold stock is trading 2.21 times its book value and 5.58 times its Ebitda.
On Dec. 16, Kinross Gold Corporation (KGC, Financial) closed at $3.03, down 10 cents from the previous close, with 44,597,899 shares traded on the NYSE. Kinross Gold is trading at 0.88 times its book value and 6.11 times its Ebitda. The analyst average target price is $5.13 per share.
Goldcorp closed at $12.53 last week, up 34 cents from the previous trading day. The price to book ratio is 0.80 and the EV/Ebitda is 9.74. The analyst average target price for Goldcorp is $19.31.
B2Gold is trading at $2.19 per share, at 1.48 times its book value and 8.20 times its Ebitda, versus an analyst average target price of $1.95.
On Dec. 16, Eldorado Gold closed at $2.75, up 3 cents from the previous trading day, with a volume of 12,583,906 shares traded on the NYSE. The PB ratio is 0.56 and the enterprise value/Ebitda is 7.60. The analyst average target price is $4.96.
Disclosure: I have no positions in any stocks mentioned in this article.
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