3 Gold Mining Stocks to Buy as Experts Expect Rally to Stretch Into 2024


Gold seems poised to wrap up 2023 on a solid note, with the current trading price around $2,023 an ounce. The yellow metal has exhibited resilience, registering an 11.5% increase since the beginning of the year, outpacing commodities, bonds and the majority of stock markets. Despite pitted against record-high interest rates, gold has thrived this year on safe-haven demand triggered by the banking crisis earlier in the year and the ongoing geopolitical instability. After experiencing declines in the preceding two years, 2023 marks a turnaround for gold, highlighting its appeal as a sought-after asset amid geopolitical and economic uncertainties.

Analysts anticipate the positive momentum to carry into 2024, with gold prices poised to reach new highs and potentially sustain levels above $2,000 per ounce. This optimistic outlook is attributed to heightened geopolitical uncertainty, a potentially weaker U.S. dollar and prospects of interest rate cuts. Central bank buying is also expected to provide additional support to gold.

For those considering investment opportunities, we recommend exploring stocks such as Alamos Gold AGI, Galiano Gold GAU and New Gold NGD.

Gold’s Run This Year

Gold’s performance in 2023 has been marked by several notable fluctuations. Starting the year around $1,839 an ounce, gold experienced an upward trend, supported by a weak U.S. dollar and a drop in the U.S 10-year Treasury yield. However, the announcement of the first rate hike by the Federal Reserve on Feb 1 resulted in gold prices dropping to a low of $1,809 an ounce as the dollar and Treasury yields strengthened.

In March, amid the banking crisis triggered by the collapse of Silicon Valley Bank and Signature Bank in the United States, gold regained prominence, surpassing the $2,000-an-ounce mark.

As confidence gradually returned to the banking sector and further rate hikes occurred in May and July, the gains in gold prices moderated. By the end of the third quarter, following the Fed’s decision on Sepr 20 to maintain interest rates between 5.25% and 5.5%, gold prices settled around $1,866 an ounce.

The fourth quarter saw a breakthrough for gold, spurred by the Oct 7 attacks by Hamas on Israel. The metal gained momentum due to the Israel-Hamas conflict, surpassing the $1,900 mark.
 
Gold peaked at an all-time record of $2,152 an ounce on Dec 4, supported by expectations of interest rate cuts. The metal has gained as the Federal Reserve held rates steady and signaled three rate cuts coming in 2024 and beyond.

To sum up, so far, gold prices have ranged from a low of $1,808 an ounce to a high of $2,152, averaging at $1,950.

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Expectations for 2024

Analysts expect gold prices to be supported above the $2,000-per-ounce level in 2024, driven by expectations of a more accommodative monetary policy from the Federal Reserve. This sentiment has been amplified by slowdowns in inflation and a cooling job market. Lower interest rates could lead to a weaker U.S. dollar, making gold more attractive as an investment,

The analysts also foresee substantial support for gold prices in the coming year from robust central bank purchases. In the third quarter alone, central banks acquired 337 tons of gold, marking the third-highest quarterly total on record. The World Gold Council’s 2023 survey indicates that 24% of central banks plan to increase their gold reserves over the next 12 months. The survey reveals a shift in central banks’ sentiments, with a more optimistic view toward gold than the previous surveys, as 62% believe that gold will have a greater share of total reserves than 46% last year.

Against a backdrop of ongoing geopolitical instability and major global elections, including those in the United States, EU, India and Taiwan, analysts perceive that investors’ need for portfolio hedges will likely be higher than normal.  

Additionally, the demand for gold in 2024 is expected to be underpinned by growing interest in jewelry and technology. Demand for physical gold is seasonally higher starting in the later part of the year, aided by the festival and wedding season in India, followed by the Chinese Lunar Year and Valentine’s Day. Demand in India has been strong on improving economic momentum and consumer confidence.

India and China, which roughly account for 50% of consumer gold demand, will continue to sustain the demand. The use of gold across energy, healthcare and technology is on the rise. Therefore, there will be an eventual demand-supply imbalance that is likely to drive gold prices, in turn, aiding the industry.

3 Gold Stocks to Buy

We have handpicked three gold-mining stocks, which currently have a Zacks Rank #2 (Buy) and a solid growth potential. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The chart below shows the price performances of these three stocks in the past year. These stocks have not only outperformed the industry, but have also outperformed the Basic Materials sector and the S&P 500.

 

Zacks Investment Research

Image Source: Zacks Investment Research

 

Alamos Gold: The company produced 399,800 ounces of gold in the nine months ended Sep 30, 2023, which puts it on track to deliver record production numbers in 2023. AGI’s efforts to lower costs will help in providing improved margins over the next several years, thereby supporting a strong free cash flow. The company continues to advance on its growth initiatives, including the Phase 3+ Expansion at Island Gold and the Lynn Lake and PDA projects.

In August, it reported the results of an updated Feasibility Study for the Lynn Lake project, which suggests higher average annual gold production of 207,000 ounces over the first five years and 176,000 ounces over the initial ten years — a 23% increase from the 2017 study. In May 2023, the company completed the previously announced acquisition of Manitou Gold Inc. Through this deal, AGI more than tripled its land package around the Island Gold Mine and added significant exploration potential in a relatively underexplored segment of the Michipicoten Greenstone Belt.

The Zacks Consensus Estimate for the Toronto, Canada-based company’s 2023 earnings has moved up 2% over the past 60 days. Earnings estimates indicate an 89% year-over-year increase. AGI has a long-term earnings growth rate of 21.8%. It has a trailing four-quarter earnings surprise of 25.6%, on average.

New Gold: The company delivered third-quarter 2023 consolidated gold-equivalent production of 111,204 ounces — the highest quarterly production since 2021. The company is currently tracking to meet the top end of consolidated production guidance for production and all-in-sustaining costs are tracking to the low end of the guided range. The Rainy River mine continues to deliver per plan, with a continued focus on operational discipline, and cost-control and cost-saving initiatives. The New Afton mine has delivered ahead of plans, as mining from B3 continues to perform above expectations.

NGD has been advancing with development plans for both assets. Rainy River continues to advance the connection ramp to the underground Main Zone from Intrepid. The company is currently evaluating the opportunity to extend C-Zone with minimal capital investment, which would extend New Afton’s mine life, and C-Zone’s profile of low operating costs and strong cash flow. The company also reported encouraging drill results and exploration plans for the K-Zone and AI-Southeast gold-copper zones. Continued focus on operational discipline and investment in growth projects will aid growth.

The Zacks Consensus Estimate for the Toronto, Canada-based company’s 2024 earnings has been unchanged over the past 60 days. The consensus mark of 6 cents per share indicates a turnaround performance from the loss of 4 cents reported in 2022. The company has a trailing four-quarter earnings surprise of 66.7%, on average.

Galiano Gold: The company’s year-to-date gold production is at 102,130 ounces. It expects full-year gold production to come in at the top end of 120,000-130,000 ounces. The Asanko Gold Mine continues to generate significant cash flows through stockpile processing, which has further strengthened its balance sheet. The Abore pit is on track to deliver higher-grade ore to the processing plant by the second quarter of 2024. The company has initiated drilling programs at Abore to convert inferred mineral resources to the indicated mineral resource category. It has completed the first phase of infill drilling of inferred mineral resources at Midras South, with the deposit advancing towards a maiden mineral reserve estimate.At Nkran, GAU has completed a phase 1 mineral resource upgrade and mineral reserve conversion drilling. The company intends to pursue accretive opportunities for growth. It plans to make the Asanko Gold Mine significant in Ghana, and double its annual gold production to 250,000 ounces in 2025.

Headquartered in Vancouver, Canada, Galiano Gold has an expected earnings growth of 500% for the current year. The Zacks Consensus Estimate for the company’s fiscal 2023 earnings has moved up 12.5% over the past 60 days.

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