Gold bulls are back — and in a big way. So why the sudden resurgence? I’ve got three quick reasons for you and a stock that could deliver 81% returns as prices continue to rise…
Gold is one of the top performing commodities this year. In Q1 prices gained 16.1% — far exceeding the 1.6% gain in the Dow. In fact, this is gold’s best start to a year in three decades — better than 2007 and 2002, both of which sparked multi-year runs in the price of gold.
So why the sudden resurgence? I’ve got three quick reasons for you…
The demand for gold is soaring.
Central banks are actively accumulating the metal with Q1 purchases increasing 28% year-over-year. Retail buying is also up sharply as Q2 gold coin sales jumped 72% from the same period in 2015.
Negative interest rates.
According to the Bank of America, a monstrous $13 trillion worth of global debt now has a negative yield. The growing tendency for central banks to utilize negative interest rates is disrupting asset allocations worldwide. As investors seek greater returns, alternative investments like gold become more attractive.
The United Kingdom’s decision to leave the European Union sent shockwaves through the global financial arena. The aftermath of this decision won’t fully play out for years. In the near-term, worries have been sparked that other nations will secede from the union thus creating more uncertainty for global trade and finance.
All three of these factors have played prominent roles in gold’s rise. The bullish performance of gold hasn’t been lost on investors either. So far this year gold stocks are among the top performers. In fact, the NYSE ARCA Gold Bugs Index (HUI:NYSE) is up 99% year-to-date.
And while many of the majors have more than doubled, Barrick Gold (ABX:NYSE), and AngloGold Ashanti (AU:NYSE) to name a couple, one of their big boys brethren has lagged behind for much of the year.
It’s Goldcorp (GG:NYSE). And I think it’s an opportunity to get in on the cheap before gold stocks make their next move.
You see, Goldcorp has silently become one of the industry’s most efficient producers.
As gold prices stagnated over the past few years, the company reigned in on spending and cut expenditures to the point where its “all-in” mining cost is below $850 an ounce. With gold currently over $1,300, that’s over $450 an ounce in profit.
What’s more, Goldcorp estimates it will produce between 2.8 million and 3.1 million ounces. This means on the low side, the company could be raking-in over a billion dollars in gross profit… and that’s at today’s gold prices. If gold continues it’s upward march, the gravy boat is going to grow.
Analysts are also expecting big things from Goldcorp. According to Yahoo! Finance, the 21 analysts currently covering the company have an average price target of $21.45. One analyst even expects the stock to hit $28, or an 81% increase from today’s price.
The bottom line here is that the table is set for gold to perform strongly in the coming months and, most likely, years. If you’re looking to ride the golden profit train, Goldcorp could be your ticket.