Gold prices high. But gold stocks a bargain.
Gold prices are still hovering near record territory, but gold mining stocks are at one-year lows. Expecting gold prices to rise, some analysts see gold stocks as a buy.
An employee picks up a gold bar at the Austrian Gold and Silver Separating Plant 'Oegussa' in Vienna this past August. Although gold prices are near record territory, gold mining stocks are hitting 52-week lows.
Lisi Niesner/Reuters/File
While gold prices are not far from the highs of last September, gold stocks are hitting 52-week lows. So why choose gold stocks over the real thing?
Right now, they’re a bargain, said Patrick Chidley, mining analyst for HSBC.
“Mining companies have been expanding their margins rapidly and as their earnings increase, these companies are paying very strong dividends,” he told CNBC Thursday.
Chidley cites Barrick Gold and Newmont Mining as top examples. “Every year they’ve been replacing their reserves. With the stock, you’re buying the reserve gold, plus you’re getting a return,” he added.
Chidley has an “overweight” rating on Barrick Gold, Randgold Resources, and El Dorado Gold.
“We think the whole mining sector is attractive right now,” he said. “Although we’re seeing gold prices come down off recent highs [the precious metal has dropped over $60 from Friday’s close], at $1,660, or $1,650 an ounce, these gold companies can make decent money.”
On Friday, spot gold was hovering around $1,645. HSBC is forecasting a rise in price to $1,850 an ounce, not based on gold’s value as a safe-haven asset, but for its performance against other currencies.
“We have been seeing devaluation of currencies versus gold,” he said. “It seems to be the anti-dollar play.”