The yellow metal bottomed at $2,650.8 an ounce overnight on Wednesday, down 3.6% on Tuesday evening, before the first exit polls. On this low, gold lost 5.4% from its all-time high of $2801.8 set on October 30.
Gold’s bearish reaction to Trump’s election is explained by his economic program, which is considered inflationary, including a desire to impose tariffs on all imports. Economists fear that this will cause the Fed to slow its rate cuts, which is negative for gold.
Trump’s election has also sent the dollar soaring, mechanically weighing on the value of the ounce of gold in dollar terms.
This is a statistically consistent behavior for gold, which tends to benefit from the uncertainty of US presidential elections until the winner is known and the uncertainty is lifted.
However, despite gold’s initial negative reaction, it should be noted that Trump’s planned policies are also likely to widen budget deficits and reduce fiscal discipline, which is positive for the yellow metal.
In addition, other bullish factors that pushed gold to its recent record highs remain relevant, such as geopolitical tensions and massive buying by central banks.
Indeed, many central banks are diversifying their foreign exchange reserves away from the dollar and into gold, as sanctions against Russia in its war against Ukraine have triggered a de-dollarization movement.
Gold’s weakness in the face of Donald Trump’s election could therefore be seen as a buying opportunity.
This is the case for gold itself, but also potentially for gold stocks. So, we set out to find the best opportunities in the sector. To this end, we’ve compiled the 5 largest gold stocks by capitalization listed in the USA into an InvestingPro watchlist.
Note that these 5 stocks are Newmont Goldcorp Corp (NYSE:NEM), Agnico Eagle Mines Limited (NYSE:AEM), Barrick Gold Corp (NYSE:GOLD), Wheaton Precious Metals Corp (NYSE:WPM) and Franco-Nevada Corp (NYSE:FNV).
Source: InvestingPro
Barrick Gold clearly stands out, with an upside potential of 29.8% according to analysts and 25.1% according to InvestingPro Fair Value, which synthesizes several recognized financial models.
What’s more, the company boasts the second-best financial health score among the stocks on the list, at 3.10, a score deemed “very good”.
Newmont also shows solid potential according to analysts (+21.7%), but Fair Value is more conservative (+14.2%), and the health score is below average.
Barrick Gold is therefore definitely a stock to watch for those who believe that the yellow metal’s current weakness is only temporary, and that it will then rapidly continue its string of all-time highs.
This is all the more true given that, at yesterday’s close, the stock was down over 9% from its 2-year high of $21.35 on October 21, and that technical factors suggest that it is ripe for a rebound.
Source: InvestingPro
As can be seen on the daily chart above, the approach of the 200-day moving average (in pink on the chart), and an uptrend line visible since the February 14 low, seems to have attracted buyers and limited Barrick Gold’s decline on Thursday.
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Disclaimer: This article is written for informational purposes only; it does not constitute a solicitation, offer, advice, counsel or recommendation to invest as such it is not intended to incentivize the purchase of assets in any way. I would like to remind you that any type of asset, is evaluated from multiple perspectives and is highly risky and therefore, any investment decision and the associated risk remains with the investor.
This article was originally published here.
