Gold has been perceived as a safe haven for investors and we’ve seen why, with its impressive performance thus far in 2020.
Taking a Look into the Investing Safe Haven of Gold
Looking for investing safe havens isn’t anything new, particularly in the present situation where the economy is staging a recovery. But the Covid-19 pandemic situation is far from over and there still is unpredictability. Is a crash around the corner? Safe haven investments can shield you from the risk present and tide you through the rough waters. To avoid the uncertainty of getting started in stock trading, you can look to direct access trading platforms by experienced online broker-dealers.
The Attraction of Gold as an Investment Haven
Gold has broken through the threshold of $2000. Despite the spiking of Covid-19 cases and the high rate of unemployment, gold’s unaffected march seems to make it really attractive for investors. They believe gold could rise even higher, making the commodity as a kind of hedge against any downturn. The hunt continues for attractive gold stocks. Realizing this, Motley Fool analyst Scott Levine suggests 3 great gold stocks – Pretium Resources ($PVG), Eldorado Gold ($EGO), and Royal Gold ($RGLD).
Gold Stock Operating an Attractive Asset
Pretium Resources operates Brucejack that has helped it to attain a free cash flow of $82.7 million in Q2, which was a record for the company. Brucejack didn’t quite have to suspend its operations in the last quarter as a result of Covid-19 and could produce 90,419 ounces. Its production forecast for 2020 has been reaffirmed by the management and stays at 325,000 to 365,000 ounces.
The Pretium management also plans to continue carrying out exploratory activities around Brucejack for the rest of the year. Despite the stock rising 30% in the past few days, and with the possibility to raise more, Levine finds it attractive because of the immense future potential of the company.
Gold Stock with Significant Growth Potential
Eldorado Gold trades at 7.8 times the operating cash flow. With shares on the discount, bargain hunters would find this attractive. The stock has an average five-year cash flow multiple of 26.1. Levine reckons that growth investors would also find this stock attractive because of the company stating its goal to invest strategically in “underexplored” areas but those with significant “organic growth potential” and having accessibility to “high-quality assets”.
Among these assets are the Kassandra mines in Greece that are now seeing paused activity as a result of government issues. But the company did confirm back in Q1 that momentum is building on that project. Recently, Eldorado also confirmed a 100% acquisition of Hellas Gold’s outstanding shares. That gives Eldorado total ownership of the assets of Kassandra. It also gives the company more flexibility to get into further joint venture partnerships.
In the second quarter, Eldorado experienced quite a strong production of 137,782 ounces, which was a 50% year-over-year increase. This came along with a reduction of all-in sustaining costs per gold ounce – $859 in Q2 this year from Q2 2019’s figure of $917. As a result, the management has further confirmed its outlook for 2020 – with 520,000 to 550,000 ounces of gold production and AISC figure of $850 to $950 per ounce.
No Direct Gold Mining, but Benefiting from the Metal
Royal Gold does not actually mine gold but provides capital upfront to the mining companies. It obtains the rights for buying gold at a discounted price already agreed upon or for receiving a percentage of a mine’s mineral production. This enables Royal Gold to benefit from the high gold price, without having to operate the assets.
This year, Royal Gold set many records. The company reported $499 million in revenue, which is an increase of 18% over its 2019 reporting of $423 million. With operating cash flow at $341 million and earnings per share at $3.03, Royal Gold set a record in each of these fronts. As far as its balance sheet goes, Royal Gold had $18.7 million net cash position in 2020, after paying down debt worth $115 million. Levine considers this impressive, particularly since the market was reeling under the Covid-19 crisis and the pandemic isn’t over yet.
Pretium Resources and Eldorado Gold boast significant growth opportunities, albeit with a certain amount of risk. Royal Gold is for those who are less risk-prepared. There probably is something for every kind of investor in gold stocks. With a commission-free broker at your service, you can get started in stock trading without too much of a hesitation.