The price of gold has surged higher in the past month but gold stocks have lagged. In today’s article we identify some key stocks that investors and traders should have on their radar.
Gold is trading as a reserve currency and has been trading strongly higher for the past two and a half years. This week it again traded at all-time highs as the political unrest in the Middle East and North Africa continued to escalate and the central banks in Europe and the United States reaffirmed their commitment to continuing economic stimulus. This has put pressure on the fiat currencies. The chart below shows the strong uptrend in gold.
As we can see, the gold price has been consolidating since November last year and looks to be setting up for another high run.
Gold Stocks
We last highlighted gold stocks in early September 2010, and they proved to have a great run into the end of the year. However since late last year they’ve underperformed the precious metal and if gold remains at these elevated levels, the producers are being set up for a re-rating near-term.
Those subscribers who follow the recommendations of MDS Financial Research should have received some healthy gains in these stocks of late.
We are taking this opportunity to review the Gold Mining sector, and have highlighted key outperformers. In the analysis we have looked at stocks that have good Return on Asset and Return on Equity, and also stocks that have some room to move on a price earnings growth. The results are tabulated below:
Gold stocks that are showing good Return on Equity and/or Return on Assets figures include:
* Focus Minerals Ltd (FML)
* Kingsgate Consolid (KCN)
* Medusa Mining Ltd (MML)
* Newcrest Mining (NCM)
* Norton Gold Fields (NGF)
* Perseus Mining Ltd (PRU)
* Ramelius Resources (RMS)
Another key fundamental measure is improving earnings. Stocks that pass on this measure include:
* AngloGold Ashanti (AGG)
* Cga Mining Limited (CGX)
* Kingsgate Consolid. (KCN)
* Medusa Mining Ltd (MML)
* Newcrest Mining (NCM)
* Ramelius Resources (RMS)
Once a portfolio manager decides on the sector of the market they wish to be exposed to, then they should look to identify stocks that are exhibiting superior relative strength. The above table highlights the performance of key gold stocks over a weekly and monthly timeframe. Gold stocks that have returned positive share price performances in the past week and (rolling) month include:
* AngloGold Ashanti (AGG)
* Allied Gold Limited (ALD)
* Beadell Resource Ltd (BDR)
* Focus Minerals Ltd (FML)
* Gold One Int Ltd (GDO)
* Greenland Min En Ltd (GGG)
* Norton Gold Fields (NGF)
* Perseus Mining Ltd (PRU)
* Ramelius Resources (RMS)
* Saracen Mineral (SAR)
* St Barbara Limited (SBM)
* Silver Lake Resource (SLR)
* Tanami Gold NL (TAM)
* Talisman Mining (TLM)
Investors also need to be mindful of the liquidity of the stock.
The Trade
Gold has had a good run in the past month and is now testing all-time highs. A breakout to the upside would give the Australian gold sector added impetus to move higher. On the other hand if gold backs off from these levels then it may provide investors with an opportunity to trade those outperforming stocks on any pullback.
Gold stocks have underperformed the gold price for the year-to-date, but it now appears that they’re set to play catch-up.
Keep the stocks that have been highlighted here on your watchlist.
By Michael Hevern
Head of Research
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Tags: gold, Gold Mining, MDS Financial, Precious Metals, research, Stock Market Analysis, Trader Dealer News, trading
