The U.S. Dollar and Gold price have always had an interesting relationship. The two seem to follow each other closely, but there are times when they move in opposite directions. So, what is the story behind the U.S. Dollar and Gold price? And what can we expect in the future? Let’s take a closer look at this historic partnership! The U.S. Dollar and Gold prices are on a roller coaster ride with the news of the trade war between China and the United States. The U.S. dollar is at a six-month high while gold prices dip to a five-week low. What will happen next? Stay tuned to find out!
Max Warren Barber the CEO of SION GOLD TRADING Fze explains that because gold is visually pleasing and workable and does not tarnish or corrode, it was one of the first metals to attract human attention. Gold has long been regarded as a safe haven in times of market turmoil. Many investors have gained exposure to the precious metal by buying stocks of companies engaged in exploration and mining. Some of the major players in the gold industry include Canada-based Franco-Nevada Corp. (FNV), Newmont Corp. (NEM), and Australia-based Newcrest Mining Ltd. (NCM.AX).
Max Warren Barber explains that Gold stocks—as represented by an exchange-traded fund (ETF), the VanEck Gold Miners ETF (GDX)—have underperformed the broader market over the past year. GDX has provided a total return of -17.9% over the past 12 months, below the -8.2% total return of the Russell 1000 Index. These market performance numbers, and all statistics in the tables and company developments below.
Fastest Growing Gold Stocks
These are the top gold stocks as ranked by a growth model that scores companies based on a 50/50 weighting of their most recent quarterly YOY percentage revenue growth and most recent quarterly YOY earnings-per-share (EPS) growth. Both sales and earnings are critical factors in the success of a company. Therefore, ranking companies by only one growth metric makes a ranking susceptible to the accounting anomalies of that quarter (such as changes in tax law or restructuring costs) that may make one figure or the other unrepresentative of the business in general. Companies with quarterly EPS or revenue growth of more than 2,500% were excluded as outliers.
- Sandstorm Gold Ltd.: Sandstorm Gold is a Canada-based gold royalty company that provides financing to gold mining companies in exchange for the right to a percentage of gold produced from mines. The company has a portfolio of 250 royalties. On Aug. 15, Sandstorm completed the acquisition of minerals royalty company Nomad Royalty Company Ltd. In the process. The implied equity value of the acquisition was approximately $590 million.
- Agnico Eagle Mines Ltd.: Agnico Eagle Mines is a Canada-based gold mining company with operations in Canada, Australia, Finland, and Mexico. It has additional development and exploration projects in the U.S. and Colombia. The company forecasts gold production of 3.2 million to 3.4 million ounces in 2022. Agnico reported Q2 2022 earnings on July 27. Net income grew 40.5% on robust revenue growth YOY. The results were impacted by a fair value adjustment on inventory sold, mark-to-market losses on Agnico’s investment portfolio, derivative losses on financial instruments, and other factors.
- OceanaGold Corp.: OceanaGold is an Australia-based gold producer engaged in the development, exploration, and operation of gold properties. The company also produces copper and silver. Its operations include the Didipio Mine in the Philippines; Macraes and Waihi operations in New Zealand; and the Haile Gold Mine in the U.S. The company employs over 2,300 people. OceanaGold also has shares that trade OTC in the U.S. under the ticker symbol OCANF.
- Torex Gold Resources Inc.: See company description above.
- Iamgold Corp.: Iamgold is a Canada-based gold mining company with operations including in Canada, Burkina Faso, and Suriname. The company has additional exploration and development projects in West Africa and other locations. It employs roughly 5,000. On Aug. 3, Iamgold reported earnings for Q2 2022. Its net loss widened YOY on growing revenue. COVID-19, inflation, and the continued development of the company’s Canada-based Côté Gold project impacted results. Note that Iamgold does not have an EPS growth figure in the chart above because both Q2 2021 and Q2 2021 EPS figures were negative.
Gold Stocks With the Most Momentum
Momentum investing is a factor-based investing strategy that involves investing in a stock whose price has risen faster than the market as a whole. Momentum investors believe that stocks that have outperformed the market will often continue to do so because the factors that caused them to outperform will not suddenly disappear. In addition, other investors, seeking to benefit from the stock’s outperformance, will often purchase the stock, further bidding its price higher and pushing the stock higher still.
- Asante Gold Corp.: Asante Gold is a Canada-base gold exploration, production, and development company. Its primary operations are at the Bibiani mine, the Chirano mine, and the Kubi development project in Ghana. The company has discovered and developed more than 24 million ounces of gold resources and reserves in Ghana. On Aug. 10, Asante announced that it had completed the acquisition of Red Back Mining Pty Ltd, which indirectly held a 90% interest in the Chirano Gold Mine, for a total acquisition cost of about $225 million. The Ghanaian government retains the remaining 10% interest.
- Orezone Gold Corp.: Orezone Gold is a Canada-based mineral development company that owns a 90% interest in Bomboré, an undeveloped gold deposit in Burkina Faso. Orezone anticipates bringing Bomboré into production in Q3 2022. It expects Bomboré to produce around 1.6 million ounces of gold over a mining life of 13 years or more. Orezone trades in OTC markets in the U.S. under the ticker ORZCF.
- Yamana Gold Inc.: Yamana Gold is a Canada-based precious metals producer. Its portfolio includes gold and silver producing properties in Canada, Brazil, Chile, and Argentina. In 2021 it produced over 1 million gold-equivalent ounces. Gold equivalent production for the year was 88% of the company’s total production and silver was 12%. On May 31, Yamana Gold announced that Gold Fields Ltd. (GFI) would acquire Yamana. The transaction is valued at $6.7 billion and is expected to close in the second half of 2022.
- Alamos Gold Inc.: Alamos Gold is a Canada-based gold producer. It operates three mines located in Canada and Mexico. It also has additional projects in development in Canada, Mexico, Turkey, and the U.S. The company employs over 1,700.Alamos Gold trades in the U.S. under the ticker AGI.
- K92 Mining Inc.: K92 Mining is a Canada-based gold mining company. It operates the Kainantu Gold Mine in Papua New Guinea. The company also has 11 drill rigs involved in exploration projects in various regions. K92 shares trade OTC in the U.S. under the ticker KNTNF. On Aug. 9, K92 said that significant gold-equivalent resources were estimated to be located at the its Blue Lake porphyry project just southwest of the company’s projects. The company has additional plans for drilling and exploration of the project.
The Impact of the U.S. Dollar on Gold Stocks
The U.S. dollar, or greenback, has had a longstanding relationship with gold dating back to the introduction of the gold standard in the 1880s, where paper money was directly linked to a specific amount of the yellow metal. Although former president Franklin D. Roosevelt removed the gold standard in 1933, the Greenback still closely correlates with gold—and subsequently gold stocks—as the metal is priced in U.S. dollars.
Typically, a strong U.S. dollar means weaker gold prices as demand for the precious metal eases from buyers using foreign currencies. Conversely, demand increases when the greenback loses value, making gold cheaper for offshore buyers. Although the U.S. dollar and gold often have an inverse relationship, both can move in the same direction. For example, during periods of global uncertainty, both assets may rise as investors flock to safe-haven investments. Due to its finite supply, gold is seen as a hedge against inflation, while the greenback’s status as the global reserve currency makes it sought after during times of risk aversion.
Advantages of Holding Gold Stocks in Your Portfolio
Two key advantages of holding gold stocks include leveraged upside and liquidity.
Leveraged Upside and Diversification: Buying gold stocks allows investors to effectively take a leveraged bet on the yellow metal’s price, as miners can increase production and grow their sales when gold rises in value. Because gold stocks closely follow the commodity’s price, the sector also provides a partial hedge against inflation, helping to diversify a “risk-on” equity portfolio.
Gold Discoveries: Large discoveries can significantly increase gold mining stocks’ prices, particularly if a junior miner has a small market capitalization. For instance, Canadian junior explorer Enduro Metals Corporation (ENDMF) announced that it had intersected gold in one of its mines in May 2021. Subsequently, shares of the $32.43 million miner more than doubled over the next several months.
The comments, opinions, and analyses expressed herein are for informational purposes only and should not be considered individual investment advice or recommendations to invest in any security or adopt any investment strategy. Though we believe the information provided herein is reliable, we do not warrant its accuracy or completeness. The views and strategies described in our content may not be suitable for all investors. Because market and economic conditions are subject to rapid change, all comments, opinions, and analyses contained within our content are rendered as of the date of the posting and may change without notice. The material is not intended as a complete analysis of every material fact regarding any country, region, market, industry, investment, or strategy.