As supply chain shortages from the pandemic remain a challenge, commodities continue to stay in demand. According to experts like Timothy Ord, president and editor of The Ord Oracle, while metal prices appear eager to double, gold stocks could see 10X gains in the next 3 years. Wall Street estimates are also bullish for 2021, with Goldman and Citibank both expecting gold to rise above around $2,300-$2,400 an ounce. After a year of bearishness following all-time highs of 2,075 in August 2020, gold looks ready to retake a long-term bullish trend that started back in September 2018.
What are the best gold stocks to buy now to add to medium or long-term returns? We have identified three opportunities in different types of gold stocks, while highlighting disruptive technology projects.
A bullish case for gold
After closing May 2021 with an impressive gain of 7.6%, Gold prices show that bulls are in the driver seat again, supported by fundamental and technical indicators.
Fundamentally speaking, trillions in government stimulus have been pumped into economies to cushion the blow against COVID-19, initialing fueling technology stocks. The quantity of money in the US economy alone, as measured by M2 money supply, increased 26% in the year beginning Feb 2020. With massive amounts of liquidity in the system, investors start looking for safe haven scarce assets that can’t be created out of thin air, including gold and cryptocurrencies.
Now that many countries are facing post-pandemic normality, investors are also looking ahead to when central banks may pump the brakes on liquidity. Consumer prices around the world hit the highest levels in 12 years in April, raising concerns that surging inflation could dampen a recovery. Historically, gold has been a protective hedge against inflation.
On the technical side, gold is trading inside a Fibonnaci ABC retracement formation started on January 6 at 1,959, continuing with a double bottom in March around 1,677. The C point was a critical break through on May 15 at 1,844, favoring a run towards a 1,965 November 2020 high.
A break of 1,965 would trigger stop losses from bears and encourage buying sentiment. It could fuel gold prices above the 2,000 critical level, with the next stop on gold prices the all-time high of 2,075 dollars per ounce.
Asia Broadband (AABB): Merging old world and new world forces
Asia Broadband, Inc (OTC: AABB) focuses on producing, supplying, and selling precious and base metals primarily in Asia. It acquires highly prospective gold projects in Latin America and distributes production through an extensive global sales network. AABB is trading in consolidation mode, ripe for a breakout after coming off recent highs in February. Year to date the stock is up over 1,500%.
Traded as AABB in the OTC market, Asia Broadband is now offering the AABB Gold token as a new revenue stream for the company. The AABB Gold token (AABBG) is a hybrid cryptocurrency with limited supply backed 100% by physical gold. AABBG will be tied to the price of gold, at a minimum of 0.1 gram of spot. The company is building bridges between the safe haven structure of gold and the scarcity, flexibility, and upside potential of the crypto world. As a result, the unique mine-to-token product can become a worldwide standard of exchange, secured and trusted with gold backing.
As they work to reduce debt, AABB currently holds over $100 million in assets, 5 times higher than the previous year. Once their proprietary cryptocurrency exchange is launched in early September, AABB will also benefit from transaction fee revenues. Under the backdrop of bullish gold trends, AABB is launching an international campaign to bolster token sales, creating shareholder value and a competitive advantage over other mining companies.
Barrick Gold: Strong operations through old world mining
Barrick Gold is one of the largest gold producers globally. It operates mining projects in Argentina, Canada, the United States, and also has copper mines in Chile.
Traded as GOLD in the New York Stock Exchange, the company reported an 8.6% increase in sales between Q1 2020 and Q1 2021. GOLD stock recently has shown weakness but has remained slightly above its 200-day moving average.
According to The Street Quant Ratings, Barrick Gold Corporation is a stock to “buy” with a target price of $27.56. “The company’s strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures, reasonable valuation levels, increase in net income and good cash flow from operations.”
Notably, CEO Mark Bristow has tried to distance the company from crypto, stating that Bitcoin and other cryptocurrencies will never replace gold and are simply bubbles. At the same time, he acknowledges that the crypto boom means the precious metal industry needs to work harder to create useable assets.
VanEck Vectors Gold Miners ETF
VanEck Vectors Gold Miners (GDX) is an ETF that seeks to replicate the price and yield performance of the NYSE Arca Gold Miners Index before fees and expenses. The fund invests over 80% of its total assets in the gold mining industry.
Research company CFRA rates GDX as a 4-star ETF. The ETF has achieved a 15.93% return in the last 12 months, while averaging a 3-Year CAGR return of 21.39%.
Investors seek GDX as a diversified way to track the entire gold mining industry and gold spot market. Since it trades more like an index, GDX volatility will generally be lower than any single name. Given bullishness on gold prices, the ETF provides an opportunity to gain exposure to the gold sector, without the sharp swings of single name exposure.
What is the best gold stock to buy?
For thousands of years, gold has been a globally recognized store of value. Historians cannot narrate the story of humankind without gold. It came from the stars, funded extraordinary adventures, and now we’re even looking for it on Mars.
Look for gold companies that are aggressive in revolutionizing their businesses, adding new business streams in line with technological change. The intersection of blockchain technology and gold offers an exciting avenue to marry an old-world standard with a new digital revolution. Companies that believe in and adapt to the change are best positioned to thrive.
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