Global gold-backed exchange-traded funds (ETF) recorded 10 consecutive months of net inflows during September — the third time this feat has been achieved since the Financial Crisis. Notably, the last two times there have been instances of 10 straight months of inflows were in the period spanning June 2007-March 2008 and January 2016-October 2016. In the first nine-month period of 2020, global net inflows of Gold ETFs were at 1,003 tons ($55.7 billion) per the World Gold Council, surpassing the previous record of 646 tons achieved in 2009.
Notably, Gold ETF net inflows have crossed the 1,000 tons mark for the first time ever. Global gold ETF holdings have peaked to an all-time high of 3,880 tons, as of September end. The pandemic and its devastating impact on the global economy have influenced investor’s risk appetite and boosted safe haven demand for gold this year.
Over the January-September timeframe, SPDR Gold Shares, iShares Gold Trust and iShares Physical Gold ETC were the top three performers, adding 375.5 tons, 158.1 tons and 108 tons, respectively, collectively accounting for around $36 billion of inflows.
North American Funds Dominate
Overall, for the first nine months of 2020, all regions saw net inflows led by the North American funds, which boosted the holdings by 648.9 tons or $36.7 billion. During this period, European-listed funds added 291.9 tons (equivalent to $15.5 billion), while Asian-listed fund holdings rose 41.8 tons or $2.3 billion. Funds listed in other regions added 20.7 tons or $1.1 billion.
Gold Prices Up 23% YTD
Gold prices have had a stellar run so far this year, clocking a 23% gain, mainly riding on the high level of uncertainty stemming from the COVID-19 pandemic. The yellow metal continues to outperform other major asset classes this year. Gold prices had even attained an all-time high of $2,089.20 an ounce on Aug 7. Gold futures for December delivery settled at $1,895.10 an ounce on Oct 8, 2020, after touching a high of $1,905.3 an ounce.
How Will Gold Fare in the Remaining of 2020?
Gold will continue to be the preferred investment option courtesy of the low interest-rate environment and the pandemic-induced global slowdown. Ongoing concerns over the surging COVID-19 infection rates in various locations and a likely second wave as economies reopen will also fuel gold prices. The uncertainty over the upcoming U.S presidential election will also boost safe-haven demand for the yellow metal.
With China recovering from the pandemic-induced slowdown, gold demand could get a significant boost in the upcoming holiday season. Also, India remarkably received healthy monsoon rainfall for the second straight year. Around 60% of the gold demand in the country is tied to the rural populace, which depends on monsoon. This could help counter the negative impact of COVID-19 in rural areas. Further, historically, gold demand in India has been high in the later part of the year thanks to the wedding and festive seasons, when buying the yellow metal is considered auspicious.
While demand remains strong, gold supply is expected to remain constrained in 2020 due to the suspension of mining operations in the earlier part of the year, in accordance to government mandates. Consequently, the impending demand-supply imbalance situation will work in favor of the metal’s prices.
On the back of the gold-price rally, the Zacks Gold Mining industry has rallied 36.8% year to date, outperforming the S&P 500’s growth of 6.2%. The industry falls under the broader Basic Materials sector, which gained 1.9%.
The gold mining industry currently carries a Zacks Industry Rank #105, which places it at the top 42% of 256 Zacks industries. Our research shows that the top 50% of the Zacks-ranked industries outperforms the bottom 50% by a factor of more than 2 to 1.
Using the Zacks Screener we have picked five gold stocks, which have a Zacks Rank #2 (Buy) and a VGM Score of A or B. Our research shows that stocks with a Zacks Rank #1 (Strong Buy) or 2 (Buy), when combined with a VGM Score of A or B, offer solid investment opportunities. You can see the complete list of today’s Zacks #1 Rank stocks here.
These stocks have also outperformed the S&P 500, year to date, which has been depicted in the chart below.
AngloGold Ashanti Limited AU: Based in Johannesburg, South Africa, the company currently has a VGM Score of A. The Zacks Consensus Estimate for 2020 earnings indicates year-over-year growth of 124%. The estimates have been revised upward by 2% over the past 60 days. The company has a long-term estimated earnings growth rate of 25.6%. The stock has gained 18.7% so far this year.
Eldorado Gold Corporation EGO: Headquartered in Vancouver, Canada, the company currently sports a VGM Score of A. The Zacks Consensus Estimate for current-year earnings indicates a year-over-year improvement of a whopping 2,325%. The company has a long-term estimated earnings growth rate of 5%. The stock has appreciated 39.5% in the year so far.
Yamana Gold Inc. AUY: The Zacks Consensus Estimate for this Toronto, Canada- based company’s ongoing-year earnings suggests a year-over-year surge of 86%. The estimate has moved 4% north in the past 60 days. The company has a trailing four-quarter earnings surprise of 19.4%, on average. The stock carries a VGM Score of B and has a long-term expected earnings growth rate of 18.2%. Year to date, the stock has appreciated 49.3%.
Pretium Resources Inc. PVG: This Vancouver, Canada based company has a VGM Score of B, currently. The Zacks Consensus Estimate for the current fiscal-year earnings suggests year-over-year growth of 20%. The estimate has moved up 18% over the past 60 days. The company has a trailing four-quarter earnings surprise of 31.7%, on average. So far this year, the stock has gained 13.3%.
Kirkland Lake Gold Ltd. KL: The Zacks Consensus Estimate for this Toronto, Canada- based company for current-year earnings calls for a year-over-year improvement of 22%. The company has a trailing four-quarter earnings surprise of 0.4%, on average. The stock carries a VGM Score of B. The company has a long-term expected earnings growth rate of 3%. Shares for the company have rallied 9.5%, in the year-to-date period.
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