Which gold stock could outperform in 2022?
During market turmoil, many investors seek safe-haven assets, such as gold, to protect their wealth. In addition to investing in physical gold, investors can also gain exposure to gold through gold stocks and gold ETFs (exchange-traded funds).
According to the World Gold Council, gold demand rose 34% year-over-year in Q122 amid the Ukraine-Russia crisis and high inflation. Demand in Q122 was driven by strong gold ETF inflows, while investment in bars and coins, as well as jewelry consumption declined.
Gold prices in the days ahead could be further impacted by rising US interest rates and a strong dollar. Rising interest rates impact the attractiveness of gold because it increases the opportunity cost of holding non-interest bearing assets, such as gold.
Keeping these dynamics in mind, we used the TipRanks stock comparison tool to compare Barrick Gold, Newmont Mining and Kinross Gold and discuss Wall Street views on these gold stocks.
Based in Toronto, Barrick is a major producer of gold and copper, with mines and projects in 18 countries in North and South America, Africa, Papua New Guinea and Saudi Arabia.
According to a preliminary update in mid-April, Barrick’s production at Q122 was down 17.7% from Q421 at 990,000 ounces. Q122 production was impacted by lower production at the Carlin and Cortez mines following the depletion of higher grade underground ore stockpiles, planned maintenance at Kibali and Turquoise Ridge and mine sequencing at Tongon .
Barrick’s previously forecast its gold production to be lowest in Q122 and to increase throughout the year. He expects copper production to be higher in the second half. The company said it was on track to meet its annual targets for gold and copper.
The company’s Q122 performance and the impact of rising costs will become clearer once the company announces its results on May 4.
Recently, Bernstein analyst Bob Brackett downgraded Barrick to hold a buy with a price target of CAD 27. The analyst noted that the yield on the 10-year TIPS (Treasury Inflation-Protected Securities) has climbed “drastically towards positive and is likely to rise,” indicating that gold prices could fall and take stocks with them. Golden.
Meanwhile, Barclays analyst Matthew Murphy raised his price target on Barrick to $28 from $26 and maintained a Buy rating. Murphy noted, “Although a global recession seems unlikely, there are many headwinds weighing on the outlook for growth.”
Murphy believes copper still appears to be heading into surplus, while gold’s “geopolitical premium is boosted.” Murphy remains bullish on some miners, with a preference for gold, like Barrick.
Other analysts on the street are cautiously bullish, with a moderate buy consensus rating based on 10 buys and four holds. Barrick Gold’s average price target of $28.11 suggests upside potential of 26% from current levels. Barrick’s listed US shares have risen more than 17% this year.
Newmont is a leading gold mining company and also produces copper, silver, zinc and lead. It has assets and projects in North America, South America, Australia and Africa.
Newmont’s Q122 sales rose 5.3% to $3 billion, while adjusted EPS fell 6.8% to $0.69. Despite higher gold prices and higher copper sales volumes, Q122 results were impacted by lower gold volumes, reflecting the impact of labor issues induced by Omicron. Additionally, rising costs and supply chain disruptions impacted Q122 results.
However, Newmont has reassured investors that it is well positioned for strong second-half results and expects to produce 6.2 million ounces of gold in 2022.
Last month, National Bank analyst Mike Parkin downgraded Newmont to a Buy Hold, but raised the price target from CAD 107 to CAD 119. While Parkin believes Newmont “remains a quality name to own,” he believes the stock is likely to trade more in line with its peers in the near term, given the recent price rally.
Parkin said he may become more constructive on Newmont heading into 2023 based on his expectations for stronger operational and financial performance.
On TipRanks, Newmont gets a consensus Hold rating based on two Buys and 11 Holds. Given the stock’s 17.5% rise year-to-date, Newmont’s average price target of $75.24 implies modest upside potential of 3.28% from current levels.
Kinross, based in Canada, is a gold mining company with operations in the United States, Brazil, Russia, Mauritania, Chile, Ghana and Canada.
Given the ongoing crisis between Ukraine and Russia, last month Kinross announced the sale of its Russian assets to Highland Gold Mining for $680 million, including deferred payments. The transaction, which is subject to Russian government approval, could impact the company’s production in the short term.
Additionally, Kinross recently announced an agreement to sell its 90% stake in the Chirano mine in Ghana to Asante Gold Corporation for $225 million in cash and stock.
Kinross will update its 2022 and three-year guidance to reflect the impact of recently announced asset sale transactions in Russia and Ghana as part of its upcoming Q122 results, scheduled for May 10. The company’s previously announced forecast indicated gold production of 2.65 million ounces in 2022 (up 28% from 2021), 2.8 million ounces in 2023 and 2.6 million ounces in 2024.
Reacting to the sale of Chirano, BMO Capital analyst Jackie Przybylowski said: “This transaction also significantly streamlines Kinross’ portfolio – Chirano is a relatively small, short-lived mine in a operating without synergies with other Kinross assets”.
The analyst reiterated a buy rating on Kinross and raised the price target to $9.75 from $9.50.
Meanwhile, the street has a moderate buy consensus rating that breaks down to 11 buys and four holds. At $7.65, Kinross Gold’s average price target implies upside potential of 50.59% from current levels. Shares are down almost 13% since the start of the year.
Gold miners have faced higher costs, labor issues, as well as supply chain disruptions, which may partially offset the impact of higher prices gold. Additionally, the Fed’s decision to fight inflation with interest rate hikes could affect gold prices in the days ahead. However, on the other hand, lingering geopolitical tensions could support a rise in gold prices.
Under the current circumstances, analysts see greater upside potential for Kinross stock over the next 12 months.
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