Why Gold Mining Stocks Are Trading At Yearly Lows Today

Gold Mining Stocks Retreat On Strong Dollar And Rising Treasury Yields

Gold mining stocks are trying to settle below the lows that were reached in late February while gold is testing the support level at $1750. Gold mining stocks have also made an attempt to settle below these levels in late July but failed to develop sufficient downside momentum.

Stronger dollar and rising Treasury yields have served as main bearish catalysts for gold mining stocks. The U.S. Dollar Index, which measures the strength of the U.S. dollar against a broad basket of currencies, is currently trying to settle above the resistance at 93.10 which is not far away from yearly highs at 93.56.

Meanwhile, the yield of 10-year Treasuries is testing the resistance at 1.38% which served as a major obstacle on the way up in August and September.

What’s Next For Gold Mining Stocks?

This is an important moment for gold mining stocks like Barrick, Newmont or Kinross as the sector is trying to settle below the important support level. In case this attempt is successful, gold mining stocks may gain significant downside momentum.

Rising Treasury yields may present a big problem for the gold market. Gold pays no interest while its safe-haven status has not provided much support in recent months as traders focused on the upcoming reduction of Fed’s asset purchase program.

At this point, the setup is bearish for gold mining stocks as Treasury yields and U.S. dollar are moving higher. However, the situation may change quickly in case the Fed is more dovish than expected. In this scenario, gold will move higher while traders will rush to buy gold mining stocks near yearly lows.

All in all, traders should be prepared for increased volatility in the upcoming trading sessions as the market will likely remain nervous until the Fed announces its Interest Rate Decision and provides commentary on September 22.

For a look at all of today’s economic events, check out our economic calendar.

Wall Street Group to Revive Talks With China to Find Common Ground – Bloomberg News

Barrick Gold Corp Chairman John Thornton, who is also a veteran of Goldman Sachs Group Inc, is in Beijing meeting with high-ranking Chinese officials, Bloomberg said, citing two people with knowledge of the matter.

According to Bloomberg, Thornton is one of the chairs of the influential group dubbed China-U.S. Financial Roundtable that was conceived during escalating tensions between the U.S. and China in 2018, with the talks featuring emissaries from U.S. finance and senior Chinese regulatory officials.

Previous meetings between Chinese officials and Wall Street banks have included participants such as BlackRock, Vanguard, JPMorgan and Fidelity.

For a look at all of today’s economic events, check out our economic calendar.

(Reporting by Bhargav Acharya in Bengaluru; Editing by Kim Coghill)

 

Why Gold Mining Stocks Are Testing Multi-Week Lows Today

Gold Mining Stocks Fall Together With The Price Of Gold

Gold mining stocks found themselves under strong pressure today as gold made an attempt to settle below $1675 before rebounding towards $1750.

Gold gained strong downside momentum and managed to move from the $1800 level to the test of the support at $1675 in just two trading sessions. Not surprisingly, gold mining stocks also moved lower.

Leading gold mining stocks like Barrick Gold, Newmont Mining, Kinross Gold and Agnico Eagle Mines declined to multi-week lows and have decent chances to continue the downside trend if gold fails to rebound from current levels.

What’s Next For Gold Mining Stocks?

The recent move in the gold market may have a significant impact on gold mining stocks which are almost always sensitive to the dynamics of the gold price.

Last week, gold mining stocks made an attempt to get out of the recent trading and move higher as gold price was stable near the key $1800 level. Now, gold mining stocks may gain material downside momentum if gold fails to find support near the important $1750 level.

It should be noted that several recent developments in individual companies can also hurt market mood. AngloGold Ashanti has recently announced that the company’s Obuasi mine may not resume production in 2021 after an incident in May. IAMGOLD has cut production guidance and increased cost estimates for Cote project.

Traders should also keep an eye on the latest developments in Treasury markets as yields keep moving higher from recent lows which may put additional pressure on gold and gold mining stocks.

The near-term direction of gold mining stocks will depend on whether traders are ready to “catch the falling knife” and buy gold mining stocks near multi-week lows. If current levels do not hold, gold mining stocks may gain serious downside momentum.

For a look at all of today’s economic events, check out our economic calendar.

Barrick Gold Sees Little Hit From Inflation, Reaffirms 2021 Targets

Chief Executive Officer Mark Bristow said the miner had accounted for costs at current levels, but if costs climbed further, Barrick could see a 1% hit.

He also said the company did not expect to exceed costs on new projects even though there was some impact, particularly from rising steel prices.

Last month, rival Newmont warned of rising costs for materials, energy and labor in second half of the year and in 2022, adding aggregate costs were seen rising about 5% when steel, fuel and oils were factored in.

Barrick reiterated its plans to spend between $1.8 billion and $2.1 billion, and all-in-sustaining costs of $970 per ounce to $1,020 per ounce of gold and $2-$2.20 per pound of copper in 2021.

It maintained its production estimate of 4.4 million ounces to 4.7 million ounces of gold attributable to the company, and 410 million pounds to 460 million pounds of copper.

Production fell 9.4% to 1.04 million ounces in the second quarter, while realized gold prices rose 5.5% to $1,820 per ounce as a weaker dollar and safe-haven buying due to pandemic-related uncertainties boosted demand.

Barrick’s all-in-sustaining costs, a metric that reflects total costs associated with production, rose 5.4% to $1,087 per ounce of gold.

U.S.-listed shares of the company, which have fallen 8% this year, were down 1.4% in premarket trading, tracking a dip in gold prices.

Shares of global miners have fallen this year after surging on record high gold prices last year.

Barrick’s second-quarter adjusted earnings per share of 29 cents beat estimates of 26 cents, according to Refinitiv IBES. Revenue of $2.89 billion, however, missed estimates of $2.92 billion.

For a look at all of today’s economic events, check out our economic calendar.

(Reporting by Arathy S Nair in Bengaluru; Editing by Shinjini Ganguli)

Why Gold Mining Stocks Are Under Pressure Today

Gold Mining Stocks Retreat As Gold Moves Below The $1800 Level

Gold mining stocks are under strong pressure today as gold declined below the $1800 level after Fed indicated that it expected two rate hikes in 2023.

The weakness is broad, and notable gold mining stocks like Barrick Gold, Newmont Corporation, Kinross Gold or Yamana Gold are down by 4 – 6% in today’s trading session.

Most gold mining stocks have already lost a lot of ground in June as gold’s previous rally was stopped near the $1900 level and traders began to take profits in shares of gold miners.

The recent sell-off in the gold market put additional pressure on gold mining stocks which are now trading at levels that were seen back in April.

What’s Next For Gold Mining Stocks?

Near-term dynamics of gold mining stocks will depend on the dynamics of the gold market. Gold moved from $1900 to $1775 in just five trading sessions and its RSI reached the oversold territory, so the chances of a rebound are increasing.

It should be noted that gold mining stocks provide investors and traders with leverage to the price of gold. This leverage works both ways so gold mining stocks are typically declining faster than the price of gold in case gold moves lower.

Gold mining stocks have started to pull back after rally in March – May before gold began to lsoe ground at a fast pace, so some traders were prepared to the recent sell-off.

However, it remains to be seen whether traders will rush into the segment in the current market environment as higher interest rates present a serious threat to precious metals.

I’d note that Treasury yields have failed to gain additional upside momentum after yesterday’s rally, and the yield of 10-year Treasuries declined from 1.59% to 1.53%. If bond markets calm down, gold prices will stabilize, and gold mining stocks will have a good chance to rebound from current levels.

For a look at all of today’s economic events, check out our economic calendar.

Gold Mining Stocks Pull Back But Stay In Bullish Mode

Gold Mining Stocks Video 18.05.21.

Low Interest Rates And Inflation Fears Provide Strong Support To Gold Mining Stocks

Gold mining stocks pulled back a bit after yesterday’s upside move as gold failed to gain more upside momentum after a successful test of the resistance at $1865.

The pullback was broad-based, and leading gold mining stocks like Newmont Corporation, Barrick Gold, Agnico Eagle Mines, Kinross Gold were under pressure in the current trading session.

However, these stocks remain close to yearly highs and may have a good opportunity to gain additional upside momentum in case the price of gold manages to stay above the $1850 level.

It should be noted that many gold mining stocks had a challenging start of the year as gold price declined and traders were focused on other market segments in search of growth.

However, the situation is changing since gold price managed to get from the lows near $1675 in March to the recent highs at $1875. Continued strong support from the Fed and rising inflation provide a solid setup for further upside for both gold and gold mining stocks.

What’s Next For Gold Mining Stocks?

Traders have already provided strong support to shares of Newmont Corporation which is up by about 25% year-to-date. The performance of Barrick Gold, Agnico Eagle Mines and Kinross Gold is more modest, but traders may use these stocks (and other similar gold mining stocks) as a catch-up play in case gold rally continues.

Valuations of gold mining stocks look low compared to many market segments. Even after the recent rally, Newmont Corporation is trading at less than 20 forward P/E. Barrick Gold’s valuation is about the same, while Kinross Gold is trading at just 9 forward P/E.

It should be noted that gold mining stocks typically provide traders with leverage to the price of gold. This is a double-edged sword since shares of gold mining stocks will likely drop more than the price of gold when the gold market is in a downside trend. However, gold mining stocks tend to significantly outperform gold when the market is bullish.

This phenomenon is already visible this year as gold is yet to get to the levels that were seen at the start of this year while gold mining stocks are moving higher. With some help from the price of gold, the current upside move in gold mining stocks will continue.

For a look at all of today’s economic events, check out our economic calendar.

3 Gold Stocks Exploring the 200-Day Moving Average

After taking a backseat to Bitcoin for the past six months, gold has finally regained some of its shine in recent weeks amid lackluster economic data and concerns about rising inflation.

“It seems to be that it is the fear of inflation rising beyond the US Federal Reserve’s comfort levels driving precious metals, helped by the suggestion of a possible rise in interest rates sooner than the Fed has been predicting all along,” Sharps Pixley’s Lawrie Williams told leading industry publication Mining Journal.

The yellow metal closed 1.6% higher Monday to settle at $1,867.60 an ounce, its highest level in over four months. Gold’s turnaround helped propel these three leading gold mining stocks above their 200-day simple moving average. Below, we take a closer look at each and use technical analysis to identify important chart levels.

Barrick Gold

Toronto-based Barrick Gold Corporation (GOLD) explores for, mines, and sells gold and copper, with key operations in North America, South America, Australia, and Africa. Last year, the miner produced around 5 million attributable ounces of gold and nearly 460 million pounds of copper. Through Monday’s close, Barrick Gold stock has a market capitalization of $44.76 billion and offers a 1.5% dividend yield. It trades up 10.93% on the year.

From a chart perspective, a break above the 200-day SMA in Monday’s trading session may act as a catalyst for a move up to key overhead resistance at $28.50.

Kinross Gold

Also headquartered in Toronto, Kinross Gold Corporation (KGC) is a leading gold and silver miner, producing roughly 2.4 million gold equivalent ounces in 2020. The company, which has used acquisitions for geographic expansion, operates in the Americas, West Africa, and Russia. Kinross Gold stock has a market value of over $10 billion and issues a 1.54% yield. YTD it trades 12.53% higher.

Taking a look at the technicals, a close above the 200-day SMA Monday on above-average volume indicates further upside that could see a test of crucial resistance at $9.30.

Kirkland Lake Gold

With an $11.62 billion market cap and 1.85% dividend yield, Kirkland Lake Gold Ltd. (KL) engages in gold mining and production activities. The company’s assets include the Macassa mine located in northeastern Ontario and the Fosterville gold mine situated in Victoria, Australia. Kirkland Lake Gold stock has gained nearly 6% since the start of the year.

Chart-wise, Monday’s breakout above the 200-day SMA may give bullion bulls the confidence to make a run at multiyear horizontal resistance around $51.

For a look at today’s earnings schedule, check out our earnings calendar.

Why Shares Of Barrick Gold Are Under Pressure Today?

Barrick Gold Video 18.02.21.

Barrick Gold Proposed A Special Dividend Of $0.42 Per Share

Shares of Barrick Gold are down by about 2% in today’s trading after the release of the company’s fourth-quarter earnings report.

Barrick Gold reported revenue of $3.28 billion and GAAP earnings of $0.39 per share, beating analyst estimates on earnings and missing them on revenue.

Barrick Gold maintained its quarterly dividend of $0.09 per share and proposed a special distribution worth $750 million, or $0.42 per share. The company explained that it had proceeds of $1.5 billion from the sale of non-core assets since 2019, and it decided to return half of this capital to shareholders.

Barrick Gold managed to deliver production and costs which were in line with its previous guidance despite the challenges posed by the coronavirus pandemic. However, the company’s solid financial performance in the third quarter failed to serve as a bullish catalyst today as traders remained focused on the recent gold price dynamics.

What’s Next For Barrick Gold?

While shares of Barrick Gold were gaining ground in premarket trading after the release of the quarterly report, they quickly lost momentum and found themselves under pressure together with shares of most gold miners.

Gold has recently managed to settle below the $1800 level which hurt market sentiment. The current market mood is bearish, and even the announcement of a special dividend did not provide enough support to the stock.

Gold miners have never attracted income-oriented investors as they were focused on developing mines rather than paying hefty dividends. As a result, the dividend yield of leading gold miners, including Barrick Gold, is low.

In this light, even a special dividend may not attract enough demand for the stock in case traders remain focused on the near-term dynamics of the gold price.

At the same time, the stock has entered into an attractive territory from a valuation point of view after it declined from the $30 level towards the $20 level. Currently, Barrick Gold is trading at less than 15 forward P/E which looks like a reasonable price for one of the biggest gold miners.

For a look at all of today’s economic events, check out our economic calendar.

3 Gold Stocks Ready to Glitter

After a record runup in gold prices during the first half of 2020, demand for the precious metal has eased in recent months amid a shift to risk-on plays and institutional investors diversifying into other inflationary-hedge assets, such as Bitcoin.

However, with central banks pumping enormous amounts of stimulus into the financial system, many analysts think the yellow metal will regain its luster as the greenback decreases in value.

“With record global debt and MMT in place, there is more certainty that it is about time that gold will reprice itself to account for dollar debasement. When faith in the modern monetary system is shaken, there is a tendency to shift towards hard assets, probably justifying why central banks across the globe have been net buyers of gold bullions since the Global Financial Crisis,” Edelweiss chief market strategist Sahil Kapoor told investors, per Kitco.

Let’s take a closer look at three large-cap gold mining stocks that closely track the commodity’s price. We’ll also use technical analysis to identify important trading levels.

Newmont Corporation

With a market capitalization nearing $50 billion, Newmont Corporation (NEM) is the world’s largest gold producer, with an annual consolidated output of around 6.39 million ounces. The gold miner, which has extensive operations in the Americas, Australia, and Africa, offers a 2.68% dividend yield and trades 32.53% higher over the past year but has eased 5% since early November.

From a charting perspective, look for entry points near support at $58.30 while targeting moves to overhead resistance at $68.50.

Barrick Gold Corporation

Toronto-based Barrick Gold Corporation (GOLD) has major mining operations in North America, South America, Australia, and Africa, with its assets significantly boosted in 2018 after its acquisition of Randgold. Last year, the company said it was on track to reach its annual gold production target of between 4.6 and 6 million ounces. The $39.56 billion Canadian-based gold miner yields 1.61% and has gained 21.31% over the past 12 months. Year to date (YTD), the shares have edged 1.8% lower.

Chart wise, look to buy the stock at current levels if support holds at the crucial $22.50 area. Consider booking profits on a move to technical resistance at $28.45.

Kinross Gold Corporation

Yielding 1.72%, Kinross Gold Corporation (KGC) explores for and produces gold in Canada, the United States, Russia, Brazil, Chile, Ghana, and Mauritania. The mining giant, which generates annual gold equivalent production of around 2.5 million ounces, received an upgrade from Barclays last month based on the company’s valuation relative to more diversified mining firms. Though Monday’s close, the gold miner currently trades at around eight times forward earnings, placing it at a significant discount to its historical earnings multiple of 37 times. Although the company’s stock has slipped nearly 5% YTD, it has jumped 40% over the last year.

From a technical standpoint, look for entries near key support at $7 while booking profits on retests of horizontal resistance at $9.30.

For a look at today’s earnings schedule, check out our earnings calendar.

U.S. Stocks Set To Open Higher As Traders Bet On Continuation Of The Upside Trend

U.S. – China Trade Deal Review Got Postponed

The review of the Phase 1 trade deal between the world’s biggest economies got postponed as the U.S. had reportedly decided to provide China with more time to increase purchases of U.S. goods.

Not surprisingly, the coronavirus pandemic put some pressure on the implementation of the first phase of the U.S. – China trade deal which remains a rare bright spot in the current relations between the two countries.

The delay of the review is a positive development for the markets since it shows that U.S. is not ready to put more pressure on China on the trade front.

Additional time will provide Beijing with a chance to boost purchases under the deal. As a result, the review of the Phase 1 deal will look more favorable and allow both parties to stay on course for the Phase 2 deal in case the political situation permits new negotiations.

S&P 500 futures are gaining some ground in premarket trading as traders believe that the trade deal between U.S. and China is not in danger for now.

More Pressure On Chinese Companies?

While the news on the trade deal front are favorable for China and the world economy, U.S. – China relations continue to trend down.

On Saturday, U.S. President Donald Trump stated that he may put pressure on more Chinese companies after he decided to ban TikTok unless it would sell its U.S. operations. China’s technology giant Alibaba is a possible target.

At this point, it looks like traders believe that U.S. will not act against other Chinese companies before the November elections so shares of Alibaba find themselves under limited pressure in premarket trading.

Berkshire Hathaway Buys Shares Of Barrick Gold

While gold and silver continue their rebound after the recent sell-off, gold and silver miners are set for a strong start of the week as Warren Buffet’s Berkshire Hathaway disclosed that it bought 20.9 million shares of Barrick Gold.

Miners’ shares have been under pressure during the recent sell-off but are set for increased trading activity after Berkshire’s move.

Berkshire’s position in a leading gold miner will increase investors’ confidence in the sector and attract new money into gold and silver miners.

For a look at all of today’s economic events, check out our economic calendar.

U.S. Stocks Set To Open Higher As Traders Shrug Off Virus Worries

World Health Organization Reports A Record Daily Increase In Coronavirus Cases

On Sunday, the World Health Organization reported 183,020 new coronavirus cases. Most of this cases (116,041) were located in the Americas region.

Meanwhile, Europe also has problems as coronavirus reproduction rate has rapidly increased in Germany while Bulgaria had to make wearing face masks compulsory again.

Despite the worrisome news, S&P 500 futures are pointing to a higher open as traders bet that the unprecedented monetary stimulus from the world central banks will continue to boost asset prices.

The risk-on mode is highlighted by the weakness of the U.S. dollar, which is declining against a broad basket of currencies. The U.S. Dollar Index failed to settle above 97.5 and pulled back below this level.

Oil Struggles To Settle Above $40

WTI oil continues its attempts to settle above the key resistance level at $40. A move above this level will likely lead to increased upside momentum and help most oil-related equities gain more ground, providing support to the whole market.

Oil supply is getting tighter due to oil production cuts while demand improves as economies lift virus containment measures. At the same time, oil traders are worried about the potential second wave of the virus and its implications for the travel industry which is an important source of oil demand.

A continuation of the current oil rally will have a positive impact on S&P 500 and could push it towards recent highs, so traders should closely watch oil price dynamics in the upcoming trading sessions.

Gold Tries To Get Above $1750

Gold may also have an impact on today’s trading session since it is trying to get above the key resistance level at $1750 on a spot basis.

Gold stocks like Barrick Gold and Newmont Mining have pulled back from their highs reached in May while gold is trying to get to new highs.

This situation creates a setup for increased demand for gold equities in case gold manages to settle above $1750 per ounce and continue its upside move after a period of consolidation.

For a look at all of today’s economic events, check out our economic calendar.

Barrick’s Gold Rush for Newmont

  • Barrick is the initiator of the transaction. Actually, this is not the first attempt by these companies to unite. If my memory serves me right, the latest attempt, an unsuccessful one, was made in 2014.
  • Barrick proposes to purchase Newmont’s shares at a discount to the market price. In particular, the merger would offer 2.5694 Barrick shares for each NEM share. Friday’s closing price is about $33.5, which implies a discount of 8% to the market price. Thus, the entire company is valued at $ 17.85 billion.
  • The birth of a giant. If the merger takes place, a real giant with a production volume of about 10 million ounces of gold and revenue of about $ 16 billion will appear in the market.

What do I think about this transaction? I am not an industry person so I will bring forth my arguments from an investor’s point of view.

First, the transaction is far from a given. I believe that Newmont is obviously undervalued. Barrick valued Newmont at an EV/EBITDA of 7, while the average of the sector is about 8.6, according to Bloomberg. According to the EV/Reserves and EV/Output multipliers (which are used to evaluate gold mining companies), the valuation of the company was done almost in accordance with market prices. Nevertheless, there is no premium for any multiplier. What are the benefits of Newmont shareholders? Moreover, it seems like this transaction is more important for Barrick than Newmont.

Secondly, if Newmont merges with Barrick, most probably, the merger with Goldcorp will not take place. As I understand, the process is already close to the final straight. Is the deal with Barrick worth sacrificing Goldcorp? I am not ready to answer this question at this point.

Thirdly, I believe that a huge hypothetical company carries high risks associated with corporate governance. It will not be easy to manage such a sockdolager.

$17.8 billion Barrick’s bid

I guess we should avoid drawing conclusions as to whether the transaction will take place or not and who will benefit more ahead of time. By the way, why not fantasize and imagine that Warren Buffett is standing behind the transaction. He could be trying to somehow get out of under after the fall of Kraft Heinz

Joking aside, shareholders of Newmont, in my opinion, must not be happy with this proposal, which makes me believe that the merger will not take place under the terms proposed. Moreover, I do not exclude that Newmont will sink a bit (many people have purchased shares against this transaction) in the event of cancellation, which will be a good opportunity to purchase shares at a discount.

The very fact of Barricks’ proposal confirms my arguments about the active process of consolidation in the sector. Judge for yourself. Gold mining is one of the most fragmented sectors in the global economy – two leaders and a whole bunch of medium and small-sized companies.

What do potential buyers seek? First of all, they check on the quality of assets, the size of reserves and resources, as well as the total cost of extracting one ounce of gold (all-in sustaining costs or AISC). In addition, a potential buyer will pay attention to the amount of debt, perspectives of operational performance, and profitability.

Will Barrick try to catch a smaller bird?

I have made a list of medium-sized companies, which, in my opinion, could be absorbed by larger ones. For example, if the purchase of Newmont fails, Barrick may well focus on some other smaller company. Moreover, we cannot rule out the factor of Newmont. Agnico, Newcrest, Anglogold, Kinross and, finally, our dear Polyus are also there.

Gold Companies

Barick Newmont Yamana Semafo IAMGOLD Endeavor Detour New GoldI have to stress once again that each of the companies above may become subject of acquisition in the foreseeable future. Each of these companies is quite promising in terms of production and revenue growth and is characterized by fairly high profitability. Besides, none of them has had a high level of debt (if the Net debt/EBITDA ratio is lower than 3, I believe there is nothing serious to worry about).

In terms of the current market valuation, I liked B2Gold, Centerra, and IAMGOLD. I think B2Gold had the most coherent valuation (taking into account one of the lowest AISC on the list; see chart). Centerra and IAMGOLD seem like the most undervalued.

I do not claim that these three companies will definitely become objects of acquisition in the near future. I am just pointing out their advantages.

The sector is in the process of intensive consolidation. Now all attention is paid to the possible transaction between Barrick and Newmont. After the transaction takes place (or fails), M&A processes may still continue in the sector. Or, the other way around. While the giants are arguing about how they should merge or whether they should unite at all, somebody may make a couple of deals on the sly…

A quite interesting period is awaiting the gold sector! I have my popcorn already.

The article was written by Evgeny Kogan, Ph.D., investment banker, the author of the telegram-channel Bitkogan.

Gold Producers – Buying Opportunity if the Reports Disappoint

As a matter of fact, Newmont is one of the world’s leading gold producers. After combining with Goldcorp, the volume of the company’s production will be about 7 million ounces. The Competition Bureau of Canada recently approved the deal, which is expected to be completed in the second quarter of this year.

Newmont NEM US ratios
While Newmont is getting ready to publish reports, let us discuss the market expectations. The quarterly report forecasts a slight increase in revenue and EBITDA and a decrease in net profit and EPS. If we compare changes from year on year, we can expect a more substantial decline. I believe that this is primarily due to the decline in gold production. Let us analyze how things will actually go. Guessing whether the market will hit the spot or not is quite a thankless job.

On the whole, I have a positive opinion on Newmont and Barrick Gold (GOLD US) and regard them as defensive assets. In terms of multipliers, they look about the same (Barrick is slightly more expensive). The difference is that the beta coefficient of Newmont is positive, while Barrick has a negative beta coefficient. Therefore, Barrick has had my preference for all seasons since it works better against the market.

Getting back to Newmont, I have to say that I don’t actually expect anything bad from the reports. If the results are lower than predicted (without force majeure), and the asset prices fall down, it will obviously be a good buying opportunity for a quality asset at a discount price, especially against the background of rising prices of gold. I expect that at this level some will enter the position, and those who already did, will increase it.

Anyway, let us wish good luck to everybody!

The article was written by Evgeny Kogan, Ph.D., investment banker, the author of the telegram-channel Bitkogan.

Global Funds in FAANGs Today, BANNGs Tomorrow?

BANNG = Barrick Gold, Agnico Eagle, Newmont Mining, Newcrest Mining, and Goldcorp. They are the collection of gold stocks that would appear in all the major gold stocks ETFs, major indices in their respective countries. They have the liquidity, market cap, dividends, along with being the group of some of the largest gold miners in the world. Barrick and Newmont are the largest gold miners in the world. Both FAANG and BANNG stocks are in a global equity fund managers MSCI ACWI Index (All Country World Index). But how in love are these global fund managers with FAANGs, and how despised are they with BANNGs?

This is the first-time investors can see how underweight Global Equity Funds are in gold’s BANNG’s stocks.

How Many Global Equity Funds Hold FAANGs & BANNGs?

When looking at the 270 Global Equity Funds, with ~480 billion in AUM, we have seen the number of funds owning FAANG’s risen from 1 in 2 (51.4%) to 7 in 10, but the number of funds holding FAANG’s has been drifting down since April 2017, when it was 72.38%, but not by much to 69% at the end of July 2018. They have been clearly selling into the rally as retail investors continue to hold on.

Global equity funds have been selling into a strength this year, building a larger underweight in FAANG and tech-related stocks. Some of that selling has been reallocated into Materials stocks but the gulf in ownership is still huge, this has further to go.Steve Holden, Founder at Copley Fund Research

This is in contrast to BANNGs today, where only 1 in 13 (7.7%) global equity fund managers have any exposure to the BANNG group. 1 in 3 funds held the BANNG’s during gold’s peak in 2011 and even held them well after gold peaked, 31.1% of global equity fund managers peaked in January 2012. The number of global fund managers didn’t start to reduce exposure until the second quarter of 2012, and more meaningful in the second half of 2012. This is almost one year after the gold price peaked.

FAANG vs BANNG

How Much Exposure Do Global Equity Funds Have to FAAANGs & BAANGs?

When we look at the funds with a global mandate, the average weight to the basket of FAANG’s has more than doubled from 2.0% to 4.6% since April 2011. But fund managers have held the line in keeping their FAANG exposure to no more than 4.5%. This is in contrast to BANNG’s that saw their exposure in global mandate funds fall by more than 90%, from a high of 0.061% to 0.068% at the low in 2013, and currently at 0.13%.

Let’s repeat that, Global equity fund managers only have an average weight of 0.13% allocation across ALL BANNGs. This presents a huge untapped opportunity for investors. Global Funds missed the runup in the gold price in the first half of 2018, as fund exposure continues to fall.

FANNG vs BANNG 2

How Many Funds Are Overweight FAANG’s & BANNG’s?

With all that exposure by global equity managers, only 29.2% of global equity funds were overweight FAANGs, down from a high in 2011, when more than 44.4% of global equity fund managers were overweight FAANGs, relative to the MSCI All-Country World Index. Interestingly, 7% of the global fund managers were overweight the BANNG STOCKS, down from a peak of 24.9% in February 2012.

FAANG vs BANNG 3

The Newmont Edge

If capital continues to flow into the US, Newmont Mining has an edge over the other BANNGs, because it is the only company that is in the S&P 500. No other BANNG will be able to do this unless they change to being domiciled to the U.S.

Over at Barrick, Executive Chairman John Thornton is taking a non-traditional approach to the gold sector, focusing on profits over production ounces. He is taking his non-mining background and focusing on creating a consistently profitable business, with the aim that many of the diversified miners have done. Mr. Thornton doesn’t have to follow the standard norms or practices as to what has been in the past, potentially setting up the company to outperform its peers as its taking an unconventional approach.

We think its welcomed. “(Thornton) doesn’t have the DNA of a mining manager, or a mining family industry executive” (National Post). We would counter, that the one thing counts for shareholders, and that is delivering shareholder performance over anything else. If he is able to deliver on earnings, the share price will follow.

Summary

The contrarian view over the next 2-3 years puts the odds in favor of BANNG’s outperforming FAANGs, as FAANGss come under political pressure, typically highlighting the end of a sector run. Global Equity Fund Managers are light on BANNG’s, so those positioned with a view over a 2-3 year time horizon will be able to capitalize on fund flows back into the sector.

Tech vs Gold

While governments are opening up to miners to expand in their countries to create jobs as we have seen in Canada, Brazil, and the United States, the Risk-Reward for fund managers presents an opportunity shift from FAANG’s to BANNG’s with better asymmetric opportunities. We think this is the beginning of BANNGs versus FAANGs as we see a sector rotation into materials and FAANGs comes under political pressure, a common occurrence at the end of a sector cycle.

This article was written by Paul Farrugia, BCom. Paul is the President & CEO of First Macro Capital. He helps his readers identify mining stocks to hold for the long-term. He provides a checklist to find winning gold and silver miner stocks and any commodity producer.